THE RELATIONSHIP BETWEEN SELECTED CORPORATE GOVERNANCE PRINCIPLES AND FINANCIAL PERFORMANCE OF INVESTMENT BANKS IN THE NAIROBI SECURITIES EXCHANGEJournal: SCHOLARLY RESEARCH JOURNAL FOR INTERDISCIPLINARY STUDIES (Vol.3, No. 23)
Publication Date: 2016-05-04
Authors : Fredrick Mukoma Kalui; Kellen Nyaguthii Kamwaro;
Page : 1939-1953
Keywords : Corporate Governance; Financial Performance; Investment Banks; CEO Duality;
Corporate governance is an area that has grown rapidly in the recent years as an emerging issue due to the global corporate scandals and collapse of big companies. The corporate governance principles hence adopted by any corporate entity affects the firm’s ability to respond to the content and context in which it operates and its overall performance. The purpose of this study was to assess the relationship between selected corporate governance principles on financial performance of investment banks in the Nairobi Securities Exchange Kenya. The objective of the study was to investigate the relationship between corporate governance principle aspects (board composition, CEO duality and board size principles) and financial performance of investment banks in the Nairobi Securities Exchange. The study used a descriptive research design where primary data was collected from the seven investment banks in the Nairobi Securities Exchange in Nairobi County using a questionnaire issued to the managers while secondary data was extracted from published financial statements. Statistical Packages for Social Sciences (SPSS) was used by the researcher to facilitate the analysis and interpretation of data and the results obtained were presented using tables, frequencies, graphs and charts for easy interpretation. The results indicated that the corporate governance principles (CEO duality and Board composition) had a strong negative correlation on financial performance in Abstract SRJIS/BIMONTHLY/ DR. FREDRICK MUKOMA KALUI & KELLEN NYAGUTHII KAMWARO (1939-1953) MAR-APRIL 2016, VOL-3/23 www.srjis.com Page 1940 investment banks while board size had a weak negative correlation on financial performance in investment banks. The regression analysis showed that CEO duality, board composition and board size had a significant effect on the financial performance in investment banks. The study recommends that investment banks operations to be governed through a clear management structure that enhances security of shareholder wealth and sustainability of the organisation. This is to be achieved by continually reviewing regulations regarding management governance structures so as to assure transparency in limiting CEO duality thus assuring legitimacy in the firm performance.
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