Governance of Banking Institutions in Africa: Perceptions of Leading Players Within the Kenyan Banking Industry

Kimani, Danson K. (2014). Governance of Banking Institutions in Africa: Perceptions of Leading Players Within the Kenyan Banking Industry. MRes thesis The Open University.

DOI: https://doi.org/10.21954/ou.ro.0000f09c

Abstract

Following an agency theoretic approach, this study sets out to investigate how banking institutions in Kenya are governed, using primarily semi-structured interview data. The study is incentivised by inadequate research on corporate governance of financial institutions within emerging economies. Accordingly, the study adopts an exploratory research design seeking to understand how governance is perceived and practiced within banks, together with the impact of corporate governance on performance of the Kenyan banking industry. The findings suggest that corporate governance is perceived differently within various banking institutions. It also emerges that corporate governance is practised along four broad lines within banks in Kenya: (a) board governance; (b) influences from global stage; (c) auditing; (d) shareholders. The results also reveal that corporate governance as considered by participants, boosts the performance of the Kenyan banking industry along three performance yardsticks: (a) going concern value; (b) cost-income ratio; (c) return on earnings. The results evidence some differences between the local institutional characteristics and assumptions founding the Anglo-American corporate governance model adopted in Kenya; where banks with concentrated ownership exhibit mainly principal-principal conflicts rather than principal-agent problems. The study recommends two mandatory independent audits - half-year and end-year audits, in order to enhance the corporate governance mechanism of disclosure, and improve governance and financial performance.

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