The effect of corporate governance on financial performance of registered transport savings and credit cooperatives in Nairobi county
The study sought to find the effect of corporate governance on financial performance of registered transport Saccos in Nairobi County. The objective was accomplished by assessing the effect of size of the board, independence of the board sub committees, supervisory role of BODs, leadership duality, frequency of board meetings, board diversity and disclosure of information on the financial performance for the period 2011 to 2013.The study had target population of 264 registered transport Saccos.Random sampling was applied to sample 88 Saccos.83 questionnaires were returned by the respondents.The researcher employed descriptive research design to explain the situation. Questionnaires were administered to collect primary data. Secondary data was collected from audited books of accounts. SPSS software was used to present the data in tables as percentages and mean. The data for the three year study was analyzed to generate multiple regression between dependent variable (ROA) and independent variables. The study findings showed that the mean for the board size was 2.3133 meaning majority of transport Saccos in Nairobi County had 5-8 board members in the period between 2011 and 2013. The extent of the application of independence of board sub committees had mean value of 2.9277.This means that majority of transport Saccos had board sub committees that exercise their mandate at a moderate extent. The mean value of 3.6345 shows that majority of transport Saccos had supervisory committee that regularly pushed for corrective actions only at a large extent. The mean of 0.6024 from the findings shows that majority of transport Saccos preferred the CEO to add up as the chairman of the board. The mean of the extent of application of frequency of board meetings was 4.0241. The research findings corroborates that majority of transport Saccos in Nairobi County applies the diversity of board members to a large extent. Disclosure of information was only applicable at a large extent in most of the registered transport Saccos since the mean value was 2.9920.The study found a strong positive relationship between corporate governance and financial performance. The study concluded that the characteristics of the corporate governance affect financial performance of the registered transport Saccos in Nairobi County.Majority of Saccos had the recommended size of the board that is effective in decision making.The board subcommittees do not fully exercise their mandate independently.Members of the board do not practice their supervisory role appropriately in the management of majority of Saccos.Majority of the registered transport Saccos had CEO that adds up as the board’s chairperson.Most of Saccos had board members that met regularly to discuss the relevant agenda of the Saccos.Likewise,majority of the Saccos implemented the policy of incorporating members of the board with diverse skills,knowledge,experience and gender.Quite a number of Saccos did not disclose full information to the shareholders. The study recommended that the registered transport Saccos should maintain recommended number of board members. Transport Saccos should allow board sub committees to do their work without undue interferences.Saccos should tap the wealth of experience from these board members assigned special committees. The BODs should supervise the management of Saccos appropriately to improve financial performance. vi The type of leadership structure adopted by Saccos should enhance effectiveness, reduce costs and solve complexity of governance. Board members should meet regularly to monitor the progress of the activities of the Saccos, strategize on areas of improvement and push for corrective actions in areas of non conformities.Saccos should always seek composition of board members with diverse skills, knowledge and experience. The management should raise investor’s confidence by making full of any relevant information. The application of the best practices of corporate governance is important to a Sacco.Therefore,the management of these institutions should enforce strictly the adherence of well governed entities to improve financial performance.The government should also enforce by streamlining all relevant regulations.