CORPORATE GOVERNANCE PRACTICES, STRATEGIC LEADERSHIP AND PERFORMANCE OF COMMERCIAL BANKS IN KENYA
BARANTE, MASAGA DANIEL
MetadataShow full item record
of Directors are not only expected to monitor a company management; they are also held responsible for an organization’s failure to conform to rules and regulations or failure to attain organizational performance goals. There has been an upsurge of Bank failures in Kenya sparking a lot of debate on the existence of sound corporate governance practices within the banking sector in Kenya. The main objective of this study was to establish the relationship between Corporate Governance practices, strategic leadership and commercial banks performance in Kenya. The specific objectives of this study are: to establish the relationship between Board of Directors’ composition and commercial banks performance in Kenya; to determine the relationship between establishment of board committees and commercial banks performance in Kenya; to determine the relationship between compensation system and the commercial banks performance in Kenya; to establish the relationship between risk management and commercial banks performance in Kenya and to examine the extent to which strategic leadership moderates the relationship between Corporate Governance practices and commercial banks performance in Kenya. This study is anchored on Agency theory, Stakeholder theory, Stewardship theory and Resource Dependence theories. The philosophical orientation of this study is positivist paradigm with an epistemological element. The research design for the study is correlational design. The target population was 273 directors of all the boards of operating commercial banks in Kenya, the sample size was obtained using purposive sampling where all the thirty nine (39) Chief executive officers (CEOs) one from each bank and thirty nine (39) non-executive directors, one from each bank were involved in the study thereby giving a sample size of seventy eight (78). A pilot study was carried out with the view of identifying and correcting any weaknesses in the research instrument. Data was collected using questionnaires. Ordinal logistic regression analysis was performed on the data collected using SPSS software and R technique to estimate and provide empirical evidence on the existence of relationship between bank performance and corporate governance practices and whether strategic leadership moderates this relationship. The research hypotheses were tested by determining the significance of the regression coefficients of the estimated models. Based on the findings, the study concludes that there is a significant relationship between Board of Directors’ composition and commercial banks performance in Kenya; establishment of board committees has no significant relationship with commercial banks performance in Kenya; Compensation system for the top bank management has a significant relationship with commercial banks performance in Kenya; the study further concludes that there is a significant relationship between risk management and commercial banks performance in Kenya and offering strategic leadership by the board enhances performance by moderating the relationship between all the study variables and commercial banks performance except for board committees. Given the findings, the study recommends that; Banks should constitute boards whose sizes are relative to the size of the banks, to be able to cover their key areas of operations, these boards should reflect diversity in terms of professional background, gender and ethnicity; Board of Directors should establish a system of compensation that is performance based and top management should be allowed share ownership of these banks, that way their interests will be aligned with those of the shareholders; commercial banks should invest in risk management systems that are able to detect risky transactions as opposed to the generic methods of Know Your Customers (KYC), that way they will significantly reduce risky transactions like non-performing loans; Boards of Directors should offer strategic leadership, drawing strategic plans detailing clear strategic objectives on key areas of operation, while disseminating the same to all bank employees. Banks should employ people with strategic orientation especially at the top level management and invest resources in developing capacity for strategic leadership.
- MKSU Doctoral Theses