INFLUENCE OF DISCLOSURE OF CORPORATE GOVERNANCE PRINCIPLES ON FINANCIAL PERFORMANCE OF KENYAN COMMERCIAL BANKS LISTED ON NAIROBI SECURITIES EXCHANGE
Abstract
This study established the effect of voluntary corporate governance disclosures on financial performance of listed commercial banks in Kenya. The specific objectives were, establishing the effect of disclosure of corporate board’s effectiveness, board accountability, executive pay and ownership structure on the financial performance of listed commercial banks in Kenya. This study was based on agency theory, capital need theory, signalling theory and legitimacy theory. This research will apply a descriptive research design with the study population being 11 listed commercial banks in the Kenyan market. Purposive sampling was applied to select commercial banks the Nairobi Securities Exchange. The study applied a data collection checklist which had the voluntary disclosure factors under study. The research was based on secondary data from the published annual reports spanning five years (2015 – 2019). Data was analysed by use of descriptive and inferential statistics. The study employed panel data regression model since the data employed had longitudinal and cross-sectional properties. Statistical package for social sciences (SPSS) was used for data analysis. The results were presented in table and figures. The study found a positive relationship between corporate board accountability, corporate board effectiveness, executive pay and ownership structure and return on equity. A 1% increase in corporate board accountability leads to a 54% increase in financial performance of listed commercial banks, while a 1% increase in corporate board effectiveness disclosure leads to a 33.9% increase in return on equity and a 1% increase in board executive pay leads to a 50.3% increase in return on equity. On the other hand, the study found a negative relationship between ownership structure disclosure and return on equity this means that a 1% increase in ownership structure disclosure leads to a 20.2% decrease in return on equity of a firm. The study concluded that firms should lean towards disclosure of corporate board accountability and ownership structure disclosure to increase their performance.
Key Words: Corporate Governance, Financial Performance
CITATION: Chepkwony, G. K., & Omwenga, J. Q. (2021). Influence of disclosure of corporate governance principles on financial performance of Kenyan Commercial Banks listed on Nairobi Securities Exchange. The Strategic Journal of Business & Change Management, 8 (3), 550 – 561.
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DOI: http://dx.doi.org/10.61426/sjbcm.v8i3.2044
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