Corporate Governance And Performance Of Selected Savings And Credit Cooperative Societies In Nairobi County, Kenya

ABSTRACT

The rate at which the SACCO sector is becoming increasingly crucial to the Kenyan economy is high. The sector provides key in the nation as it controls around 43 per of gross domestic product (GDP). The cross-cutting issues affecting co-operatives are governance, weak regulations and supervision as well as risks involved in investments. Top on the list and one which results to SACCO failures, stagnation and collapse is lack of a framework to ensure enforcement, regulatory and supervisory agencies possess the integrity, resources and power, integrity to function objectively and efficiently. Lack of proper direction, control and accountability by the directors and management in SACCOS to the principal shareholders, exposes them to irregularities. This called for an investigation into the effect of corporate governance on the performance of selected SACCOs in Nairobi City County, Kenya which was the general objective of the study. The specific objectives of the study was to establish the influence of board composition, size of the board, board members qualification and gender balance of the board members on the performance of SACCOs in Nairobi. The study was underpinned by two theories which are agency theory and stakeholders‟ theory. The study used a descriptive research design. The unit of observation was six selected SACCOs in Nairobi City County while the unit of analysis was the 191 management staff working with the SACCOs. Stratified random sampling technique was used to select a sample of 30% from each strata making up a sample of 58. Semi-structured questionnaires was used to collect data from the respondents. A pilot study was carried out on the research questionnaire. Research data was then be analyzed by the use of descriptive and inferential statistics using SPSS. Descriptive statistics were percentages, frequencies, standard deviations and means while inferential statistics were largely based on multiple regression analysis. Data analysis was then presented in the form of tables and graphs. Research ethics was also upheld in the course of the study. The findings show that the predictor variables explained 74.4% of the variations in the corporate governance in the SACCOs. The result from the regression analysis showed that the board composition and board size were significant at 0.05 level of significance with p values of 0.009 and 0.31 respectively. However the board members‟ education and gender diversity were not significant with p values being 0.150 and 0.178 respectively. The study concludes that board composition and board size have a significant effect on the performance of the selected SACCOs. This study thus recommends that the SACCOs must put much emphasis on a lean board size and ensure that the composition of the board takes into consideration the professional and knowledge diversity of the board members.