CORPORATE GOVERNANCE AND FINANCIAL PERFORMANCE OF SELECTED COMMERCIAL BANKS LISTED AT NAIROBI SECURITIES EXCHANGE IN KENYA
Isaac Maramba Omware - PhD Student, Kenyatta University, Kenya
Gerald Atheru - Lecturer, Kenyatta University, Kenya
Dr. Ambrose Jagongo - Lecturer, Kenyatta University, Kenya
ABSTRACT
Performance of commercial banks has been impressive in terms of profits in the last few years. This may be as a result of good governance in the banking sector. The study examined the Corporate Governance factors and Financial Performance of commercial banks listed in Nairobi Securities Exchange in Kenya. Specifically, the study examined the effects of board size, board independence, level of education of board members, ethnic composition and gender diversity of board members on financial performance. The performance of the firm was measured using Return on equity, Return on asset and Net interest margin. A cross sectional and analytical research design was used in this study. The population involved in this study is 11 commercial banks commercial banks listed in the Nairobi Securities Exchange in Kenya. Purposive sampling was used to obtain sample representation of the entire population. In this case, 5 of the 11 Chief Executive Officers from the banks were interviewed. Primary data was obtained by administering questionnaires to Chief Executive Officers and Senior Management Officers of the sampled banks. 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 addresses specific contents and objectives of the study. Statistical Package for Social Scientists was used and Spearman Correlation Coefficient and Multiple Regression Analysis to determine the magnitude of the relationship and prediction of financial performance respectively was applied. From the study we can therefore conclude that size of the board, board independence, level of education of board members, gender diversity, and ethnic composition positively influence the financial performance of commercial banks listed to a great extent.
