The effect of corporate governance on financial performance of Commercial Banks in Kenya
The study examined the Corporate Governance factors and Financial Performance of commercial banks in Kenya. The study aimed at establishing the effects of corporate governance practices and policies on financial Performance of commercial banks. A cross sectional and analytical research design was in this study. The population involved in this study was all the 44 commercial banks in Kenya. A sample ratio of 0.3 was used to obtain sample representation of the entire population. In this case, 13 CEOs from the sampled banks were subjected to the study. Primary data were obtained by administering questionnaires to CEOs of the sampled banks. Secondary sources were also used to obtain information; data from the published annual reports and company sources spanning five years. The content validity of the two instruments of data collection was assured by ensuring that each of the items in the questionnaire and interview schedule addressed specific contents and objectives of the study. Statistical Package for Social Scientists (SPSS) was used and Spearman Correlation Coefficient and Multiple Regression Analysis to determine the magnitude of the relationship and prediction of financial performance respectively were applied. It was found out that corporate governance play an important role on bank stability, performance and bank’s ability to provide liquidity in difficult market conditions. From the findings, corporate governance factors (CGPR, CGPO, DPP and SRR) accounts for 22.4 % of the financial performance of commercial banks, derived from adjusted R square value of the regression test.