Analysis of Corporate Governance Practices and Financial Performance of Savings and Credit Corporative Societies: A Case Study of Kite Sacco Society Limited Kisumu City, Kenya (original) (raw)
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Savings and Credit Cooperative Societies (SACCOs) currently are predominant form of external financing for small and micro enterprises in most developing countries. In the year 2012, the SACCOs industry's total assets grew by 17.8% to Ksh.292.9 billion from Ksh.248.7 billion in 2013. In Kenya, SACCOS have been noted to contribute over 13.5% of GDP, and it is estimated that at least one out of every two Kenyans directly or indirectly derives his /her livelihood from these kinds of cooperative movements. It is important to emphasize that good corporate governance practices in the SACCOs is imperative if the cooperative movement is to effectively play a key role in the overall development in Kenya. This has also received much attention in the accounting literature, with studies focusing on the impact of corporate governance and the financial performance of the firm. However, previous research has shown that corporate governance in SACCO'S in Kenya has not been effectively regulated and supervised and thus the constant decline in performance of these SACCOs. Therefore the purpose of this study was to analyze the effect of corporate governance practices on financial performance of Saccos; a case of KITE Sacco society in Kisumu city. The specific objectives of the study were to: assess the effects of board composition, establish the effects of number of non-executive directors and determine the influence of SACCO leadership on the financial performance of KITE SACCO society. The study was guided by a self-conceptualized framework with corporate governance practices as independent variables and financial performance of Saccos as the dependent variable. It adopted causal research design with all the 19 targeted staff members of the Sacco forming the sample size. The study used both primary and secondary data. A semi-structured self-administered questionnaire to the Board of the Sacco, and staff members was used to collect primary data. Secondary data was collected through content analysis. Validity and reliability of the instrument was checked using expert reviews. Descriptive statistics such as mean and standard deviation was employed to analyze the data and inferential statistics such as Pearson's correlation. Presentation was done by the use of tables and charts. The study revealed that board composition is the most prevailing factor that affects financial performance at KITE Sacco (0.658, p< 0.05) and strongly affects Sacco leadership (0.789, p<0.001). Also realized was that Sacco Leadership strongly affects financial performance at KITE (0.835, p<0.01). Besides, the study evidenced that existence of non-executive directors positively affects financial performance (0.381, p<0.05), weakly affects board composition (0.436, p>0.01) and strongly affects Sacco leadership (0.053, p<0.05). The study concludes that board composition is the most prevailing factor that affects financial performance at KITE Sacco and as well affects the Sacco leadership. Also, the study showed that existence of non-executive directors within the Sacco positively affects financial performance but weakly affects board composition and strongly affects KITE Sacco leadership. These findings may assist KITE Sacco leadership identify how various aspects of corporate governance practices (board composition, existence of non-executive directors) affect their operations as well as ensure that the breakdown of spending across projects is clear, and accounting records properly maintained. Further, the study may provide information to potential and current scholars in regard to the relationship between corporate governance and financial performance of SACCO societies.
The International Journal of Business and Management, 2021
Corporate Governance Practice is a management tool that was introduced by Nairobi Securities Exchange (NSE) through the Capital Markets Authority (CMA) as statutory requirement for companies listed at NSE to improve their financial performance. Though corporate governance practices have been enforced in Kenya, it has in equal measure experienced cases of mismanagement of Savings and Credit CoOperative Societies (SACCOs) that has led to collapse of a number of them and others have experienced liquidity challenges. A case in point was the mismanagement of the giant Harambee SACCO which put management of SACCOs on the spotlight. Despite several studies on Corporate Governance Practices, it is not clear how insider lending, an aspect of corporate governance, affected the financial performance of SACCOs. The study examined effect of adoption of corporate governance practices, aforementioned, on financial performance of SACCOs. Three theories guided the study, namely; Agency, Stewardship and Stakeholder theories. The study adopted descriptive research design that involved set of methods and procedures that described intended variables and how they relate to each other. The study adopted Israel, (1992) formula to sample 53 from the population of 61 SACCOs registered with the County Cooperatives Officer in Nyandarua County, and thereafter, from the 53 sampled SACCOs, two top managers were sampled. This led to a sample of 106 respondents. Primary data was collected using a structured questionnaire whereas; secondary data was collected through documentary analysis. Data was analysed using descriptive and inferential statistics and results presented in form of tables and charts. Of the 106 distributed questionnaires, 100 were duly filled and returned and therefore the response rate was 94.3%. The R square was equal to 0.778 while the adjusted R square value was 0.770 which means that 77.0% of the corresponding variation in financial performance of the SACCOs can be explained by corporate governance practices employed by the SACCOs. Multiple regression analysis indicated that insider lending had a great effect on financial performance of SACCOs with a coefficient of-0.391 while the appointment of internal auditor with a coefficient of 0.243. The variable on insider lending had a negative coefficient implying that a unit increase in insider lending led to a decrease in financial performance of the SACCOs by 0.391 units. The variables were all significant at p=0.000 and p=0.013 for the constant term. The study therefore fails to accept the null hypothesis that corporate governance practices have no statistically significant effect on the financial performance of SACCOs in Nyandarua County and states that corporate governance practices.
International Journal of Scientific and Research Publications, 2022
Corporate governance is the backbone of transparency, accountability, integrity and security of shareholders’ interest in an organization. An organization with poor corporate governance structure is likely to fail to achieve its objectives as well as have exposure to financial losses. The purpose of this study is to examine the effect of corporate governance on the financial performance of Deposit-taking Savings and Credit Co-operative Societies in Nairobi City County, Kenya A purposive sampling method integrating qualitative and quantitative design methods was employed in this study. The target and sample population were all the 42 Deposit-taking Savings and Credit Co-operative Societies in Nairobi City County, Kenya while a sample of 30 deposit-taking SACCOS was used for this study. For the 30 deposit-taking SACCOS, the company secretaries and other two executive top management members were each subjected to the study through the administration of questionnaires, hence three respondents per deposit-taking SACCOS. The published annual reports of the of 30 deposit-taking SACCOS were used to collect secondary data. SPSS research analysis tool was used emphasizing on the Multiple Regression Analysis and the Spearman Correlation Coefficient among others to assess the magnitude and relationship and thus come up with a finding of the relationship of the independent and dependent variables. The research found that corporate governance practices greatly affect Deposit-taking Savings and Credit Co-operative Societies in Nairobi City County, Kenya
Effect of Corporate Governance on Financial Performance of SACCOS in Kenya
This study sought to find out the effect of corporate governance on financial performance of savings and credit cooperatives.. The study looked at five theories related to corporate governance namely: agency theory, stakeholder theory, stewardship theory, simple finance model and the political model. It looked at work by others in Kenya, Uganda, Nigeria and Korea. There are 121 Sacco's in Nakuru, out of which there are fifty active Sacco's. The study did a survey of three Sacco's which have the majority of Sacco members. The study targeted all employees of the Sacco's. The study adopted a census method. They were availed to the respondents so that they could fill and return them. The study was carried out between May 2013 and December 2013. The study used Spearman's rank correlation to analyze and present findings in tables showing percentages, frequency distribution, and also bar graphs, and pie charts. The study found out that there was a significant relationship between financial reporting and financial performance of savings and credit cooperatives. Sacco's with more frequent financial reporting structures showed better financial performance. The study found out that there was a significant relationship between management style and financial performance of savings and credit cooperatives. Participative management with democratic leadership enhanced the financial performance of Sacco's. The relationship between size of the board and financial performance was insignificant at 5% significance level. The study recommended that financial reporting should be done as frequently as possible, and management should use a leadership style that is most comfortable to employees and Sacco size should be kept where financial performance is least affected adversely. The study further recommended that studies should on corporate governance be carried out in other areas such as microfinance institutions, commercial banks and the financial sector as a whole.
2016
This study mainly analyzed the concept of corporate governance and it influence on the financial growth cooperative societies in Kirinyaga County, Kenya. This study identified some salient aspects of corporate governance and recognized it as one that is more relevant to the distinct governance features of Sacco societies. For this a descriptive research design was used. The population of interest for the study was 31 SACCOs operating in Kirinyaga County. The study targeted 327 members of SACCO's staff. A sample of 104 respondents was randomly selected. The primary data were collected through the administration of questionnaires to the staff of these SACCOs. Data was analysed using a multiple linear regression model. The study indicates that board leadership, financial performance disclosure, corporate social responsibility and compliance with legislation predict financial growth of SACCOs. The study, recommends that the SACCOs should adopt sound financial reporting and disclosur...
Kca University, 2016
DEFINATION OF TERMS Cooperative society-an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned democratically controlled enterprise (villalonga, 2002). Corporate governance-the structures, processes, cultures and systems that ensure the successful operation of an organization it's the process through which organizations are led toward the attainment of the objectives for which they were founded (Donaldson, 2003) Good governance-it addresses the allocation of resources to respond to collective problems, Calls for a strong and independent audit function and effective board process (Maina and Kabianga, 2004) Financial performance-is a measure of how well a firm can use its resources to generate profits
2018
The study sought to establish the effect of corporate governance on the performance of savings and credit cooperative societies (SACCOs) in selected private universities in Nairobi County, Kenya, and the corresponding hypothesis was formulated and tested. The study targeted 120 employees of SACCOs in the sixteen selected private Universities in Kenya and 110 of them responded. The study adopted a descriptive research design and purposive sampling design. SPSS Version 21 was used to analyze data using multiple regression analysis. Research findings from the test of hypothesis established that corporate governance positively and significantly affected the performance of SACCOs in private Universities in Kenya. The study findings support Agency theory and stakeholder theory which explain the role corporate governance plays in organizational performance.
Corporate governance is of great importance for financial performance. Corporate governance issues have attracted public interest in the financial sector both locally and internationally after waves of corporate rip-offs and failures that almost led to loss of confidence in the finance sector. The general objective of this study was to determine the effect of corporate governance on financial performance of Savings and Credit Co-operatives in Kenya. The study adopted a descriptive research design. The study targeted a population of 65 active Savings and credit Co-operatives operating in Embu County. A sample size of 57 Savings and Credit Co-operatives was used in this study. Stratified sampling technique was used to select the sample. Primary data was collected using self-administered semi-structured questionnaires while secondary data was obtained from financial statements and periodicals using a record survey sheet. Pre-testing of research tool was conducted before the actual data collection was carried, to determine the reliability of the questionnaire by use of a Cronbach‘s alpha, statistical coefficient, while the validity was tested to ensure that the questions in the questionnaire provides adequate coverage to the investigative questions. Correlation and multiple regression analysis was used to establish the relationship between independent and dependent variables. The study findings indicated that corporate governance positively affected the financial performance. In specific the board composition and corporate risk management for SACCOs had a positive effect on the financial performances of the SACCOs. The study is beneficial to SACCOs management in improving the performance of Savings and Credit Co-operatives and enabling them to compete globally. The study recommends gender parity consideration and balanced mix of skilled board members during appointments of the board members. The recommendations are important to the government, especially the department of cooperatives in strengthening policies regarding cooperative societies.
Corporate governance is of great importance for financial performance. Corporate governance issues have attracted public interest in the financial sector both locally and internationally after waves of corporate rip-offs and failures that almost led to loss of confidence in the finance sector. The general objective of this study was to determine the effect of corporate governance on financial performance of Savings and Credit Co-operatives in Kenya. The study adopted a descriptive research design. The study targeted a population of 65 active Savings and credit Co-operatives operating in Embu County. A sample size of 57 Savings and Credit Co-operatives was used in this study. Stratified sampling technique was used to select the sample. Primary data was collected using self-administered semi-structured questionnaires while secondary data was obtained from financial statements and periodicals using a record survey sheet. Pre-testing of research tool was conducted before the actual data collection was carried, to determine the reliability of the questionnaire by use of a Cronbach‘s alpha, statistical coefficient, while the validity was tested to ensure that the questions in the questionnaire provides adequate coverage to the investigative questions. Correlation and multiple regression analysis was used to establish the relationship between independent and dependent variables. The study findings indicated that corporate governance positively affected the financial performance. In specific the board composition and corporate risk management for SACCOs had a positive effect on the financial performances of the SACCOs. The study is beneficial to SACCOs management in improving the performance of Savings and Credit Co-operatives and enabling them to compete globally. The study recommends gender parity consideration and balanced mix of skilled board members during appointments of the board members. The recommendations are important to the government, especially the department of cooperatives in strengthening policies regarding cooperative societies.
European Journal of Business and Management, 2014
The study on the effect of corporate governance on performance of SACCOs was based on the revelations that some cooperatives are ailing, while others are very vibrant and sustainable. Good corporate governance is now accepted as vital to achieving the Millennium Development Goals and as a pre-condition for sustainable economic growth. The purpose of this study was to examine the effect of corporate governance on performance of SACCOs. Corporate governance was operationalized by transparency and accountability, shareholder involvement, policies and guidelines, and rewards and incentives while performance of SACCOs was characterized by growth in share capital/deposits, growth in membership, growth in turnover, and customer satisfaction. The significance of the study was to demonstrate the need for good corporate governance in the co-operative movement. Extensive literature was reviewed to establish the importance of the study, highlighted knowledge gaps and provided benchmark for comp...