Analysis of Corporate Governance Practices on Financial Performance of Foreign Banks in Kenya: A Case of Standard Chartered Bank

Abstract

The study analysed the effects of corporate governance on the financial performance of foreign banks in Kenya. The specific objectives of this study were to: examine the effect of board size on financial performance of foreign banks in Kenya, to establish the effect of Chief Executive Officer duality on financial performance of foreign banks in Kenya and evaluate the effect of board composition on financial performance of foreign banks in Kenya. The main theories for this study were the agency theory and stewardship theory. Descriptive design was used by the study. Stratified sampling was employed as the sample method in the study. A total of 176 participants was analyzed in this investigation, and the sample size consisted of 122 participants. The research methodology primarily relied on gathering data through primary research. A well-designed questionnaire was used to collect information from the target audience. Data was cleaned, coded and analyzed. The study made use of both descriptive and inferential statistics. Findings indicated a positive and significant association between board size and financial performance of foreign banks in Kenya (β =0.233, p < 0.05). There was a positive and significant relationship between Chief Executive Officer duality and financial performance of foreign banks in Kenya (β =0.371, p < 0.05). The link between board composition on financial performance of foreign banks in Kenya was positive and significant (β =0.451, p < 0.05). The study concludes that effective communication between the board of directors and the executive management team is vital for a company's financial performance. The size of a board of directors can directly affect how decisions are made within the organization. Skills, knowledge and experience of board members are foundational to their ability to effectively oversee the organization's operations and strategic direction. The study recommends that foreign banks in Kenya should ensure the right number of people who serve on the board of directors. The banks should have a policy on Chief Executive Officer duality as it helps enhance the financial performance. It is recommended that foreign banks board members should possess the right skills, knowledge and experience that would help to effectively oversee the organizations’ operations and strategic direction.