Abstract:
Corporate governance has now become a mainstream concern addressed as a key item in corporate boardrooms, academic meetings as well as innovation policy circles around the globe. Corporate scandals have become almost a daily ingredient of present day institutional management, a factor that has continued to greatly hurt the owners of those institutions. While discussion continues as to the extent to which specific elements under corporate governance affects a firm’s overall performance, most previous researchers have found that good corporate practices contribute to a firm’s innovation and overall financial performance. This research project sought to find out the effects of corporate governance on the financial performance of Savings and Credit Cooperative Societies in Nyeri Central Sub County, Kenya. The researcher’s variables under corporate governance included Board Composition, which comprised of the following variables; Board Independence, CEO Duality, Board gender diversity and Board size. The second variable was SACCO’s Audit Function which focused on internal audit function as well as audit committee independence. The last variable under consideration was Board activity which included board tenure and frequency of board meetings. To be specific, the researcher sought to find out the magnitude of effect, if any, of each of these variables on the financial performance of SACCOS in Nyeri County. The study adopted a census study of all the 26 active SACCOs out of the 39 registered ones in the whole sub county as gathered from the Directorate of Co-operative Development of Nyeri County Government. The research targeted CEOs of all the SACCOs together with the executive Board, which comprises of 4 members. This translated to a total of 130 respondents. The study considered financial performance of the SACCOs for
5 financial years 2011-2015. The study made use of both primary and secondary data. Primary data was collected through questionnaires, which were dropped in person and picked later. The questionnaire was tested for validity and reliability using a pilot study, seeking expert opinion and using SPSS derived Cronbach’s Alpha. Secondary data was gathered from the financial reports of the SACCOS and other corporate handbooks. Statistical Package for Social Scientists (SPSS) was used to generate both descriptive and inferential statistics. Multiple linear regression was utilized to explain the magnitude of effect, if any, of the variables under study on financial performance. Study results indicated that Corporate Governance has a statistically significant implication on the financial performance of SACCOs. As such, the researcher recommended more innovation on measures to improve Corporate Governance standards in SACCOs in order to safeguard shareholder wealth and assure a steady growth of their investment.
