Role of corporate governance on the financial performance of listed banks in Kenya

Abstract

The study sought to analyze the impact of corporate governance on performance of listed banks. This study employed a descriptive design. Google doc questionnaires were used to collect data from respondents. Data was analyzed using Microsoft Excel along the research questions. Descriptive statistics was used to analyze quantitative data and findings presented using charts and percentages tables using. The study didn't have a sampling method as the population was small. The respondents were mostly from the employees drawn from the various departments of the banks. On the effect of board composition on performance, majority of the respondents agreed that board composition increases efficiency of the banks. However, most of the respondents disagreed that large board of directors are prone to more conflicts among board members which makes it difficult to reach agreements. This finding were in line with the several studies which established that board composition influences firm performance. About CEO duality effect on performance of listed banks, most respondents strongly agreed that the roles of Chairman of Board and CEO should be clearly defined and not vested in the same person as this affects financial performance. A huge portion of the respondents disagreed that CEO duality creates conflict of interest and it's not good for financial performance of the banks. However, existing literature on CEO duality offers differing perspectives in this regard. Lastly, about audit committee composition on financial performance, the respondents noted that Audit committee independence has an effect of financial performance. If the audit committee is independent, and work of the committee fair, then frauds occurring in firms could be curbed and this will impact positively on the financial performance. The study recommends that banks should ensure that there are two separate people in the CEO and Chairman of the Board of Directors positions to ensure that the decision-making aspects of the Board are fairly handled. The audit committee's scope should be stressed as a means of providing a deep understanding of the issues and an impartial view of the operating aspects of the company. The board committees should however have enough leaders, experienced members with skills to make a positive approach to the recommendations that have been given to them.