The relationship between corporate governance and financial performance: A study of insurance firms in kenya
The aim of the research was to find out the nature of relationship between corporate governance and financial performance of registered insurance companies in Kenya.The study aimed at establishing how the number of directors, number of resolutions passed in general meetings, number of committees and the frequency of holding meetings affect the insurance firms‟ financial performance in Kenya. The research design used was a cross- sectional survey of insurance companies licensed in Kenya and this design is one of the correlation designs used to establish the relationship between two or more variables. In this study, there was one dependent variable namely firm performance and four independent variables namely board size, number of resolutions passed in the AGM, frequency of holding meetings in a year and number of committees. The population of interest was all the 45 insurance firms listed in Kenya during the period of 2010-2012 but the study covered 80% of the population target and data was analyzed using the SPSS statistical package. The study established that the number of board committees, board meeting frequency, number of resolutions passed in an AGM and number of board of directors all are positively correlated with financial performance. The number of board committees caused the greatest change of 0.577 followed by board meeting frequency by 0.157 while number of directors and resolutions passed caused the least changes of 0.082 and 0.021 respectively. In conclusion each of the independent variable studied plays a key role in the financial performance of insurance firms in Kenya. The study recommends that because the elementsof corporate governance practices studied contribute positively to the financial performance of insurance companies, they should be embraced by all insurance firms in Kenya. The study suggests further studies to be conducted on other elements of corporate governance and their influence on financial performance. Further studies should also be conducted on other factors that may influence financial performance of insurance firms apart from corporate governance and other ways of measuring financial performance in order to find out if the outcomes will be identical with that of this study.