CORPORATE GOVERNANCE FRAMEWORK AND FINANCIAL PERFORMANCE OF LISTED COMMERCIAL BANKS IN KENYA
Abstract
This study sought to analyze the impact of the corporate governance framework on the financial performance of listed commercial banks in Kenya. The study specific objectives were; to assess the effect of board governance on the financial performance of listed commercial banks in Kenya, to evaluate the effect of stakeholder relations on the financial performance of listed commercial banks in Kenya, to determine the effect of internal control on the financial performance of listed commercial banks in Kenya, and to establish the effect of transparency on the financial performance of listed commercial banks in Kenya. Guided by agency theory, stakeholder theory, and stewardship theory. The study employed a cross-sectional research design. The target population consisted of all 10 listed commercial banks in Kenya. The study will employ secondary data, which was collected through document analysis from audited financial statements of commercial banks. The study employed a census-sampling technique; therefore, all the listed commercial banks were considered. The study employed inferential statistics. Inferential comprised of model summary, ANOVA, correlation analysis and multiple regression analysis. The study findings established that corporate governance has a significant positive effect on the financial performance of listed commercial banks in Kenya. Specifically, board governance was found to have a positive and statistically significant effect on financial performance (β = 0.454, p = 0.003), indicating that improved board structures and oversight enhance asset utilization and profitability. Stakeholder relations emerged as the strongest predictor (β = 0.629, p = 0.008), showing that effective shareholder engagement and equitable treatment significantly improve financial performance by strengthening investor confidence and resource access. Internal control systems also had a positive and significant effect (β = 0.398, p = 0.001), suggesting that strong risk management, accountability, and control mechanisms enhance efficiency and reduce losses. Similarly, transparency was found to positively and significantly influence financial performance (β = 0.487, p = 0.009), implying that timely and accurate disclosure improves stakeholder trust and reduces information asymmetry, thereby enhancing financial outcomes. The study recommends that the listed commercial banks in Kenya strengthen corporate governance practices to enhance financial performance. Specifically, banks should improve board operations through continuous training, effective oversight, and regular performance evaluations. They should also enhance stakeholder relations by ensuring equitable treatment of shareholders and strengthening engagement with investors and other stakeholders. In addition, banks should reinforce internal control systems by improving risk management, accountability, and internal audit functions to minimize inefficiencies and financial losses. The study further recommends enhanced transparency and disclosure to reduce information asymmetry and strengthen stakeholder confidence.
JEL: M40, M41, M42
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DOI: http://dx.doi.org/10.46827/ejefr.v10i3.2200
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