Corporate governance and financial performance of insurance firms in Kenya

This study examined the relationship between corporate governance and the financial performance of insurance firms in Kenya over the period 2013–2018. The data were collected from 51 Insurance firms licensed to operate in Kenya as of 31 December 2018. Regression analysis was used and the results sho...

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Autores principales:	Isaac Kibet Kiptoo, Samuel Nduati Kariuki, Kennedy Nyabuto Ocharo
Formato:	article
Lenguaje:	EN
Publicado:	Taylor & Francis Group 2021
Materias:	corporate governance board independence board composition board diversity board size financial performance Business HF5001-6182 Management. Industrial management HD28-70
Acceso en línea:	https://doaj.org/article/b7d3e0d2c61b4005b76ec6102d0e5b61
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spelling	oai:doaj.org-article:b7d3e0d2c61b4005b76ec6102d0e5b612021-12-02T16:25:39ZCorporate governance and financial performance of insurance firms in Kenya2331-197510.1080/23311975.2021.1938350https://doaj.org/article/b7d3e0d2c61b4005b76ec6102d0e5b612021-01-01T00:00:00Zhttp://dx.doi.org/10.1080/23311975.2021.1938350https://doaj.org/toc/2331-1975This study examined the relationship between corporate governance and the financial performance of insurance firms in Kenya over the period 2013–2018. The data were collected from 51 Insurance firms licensed to operate in Kenya as of 31 December 2018. Regression analysis was used and the results showed that corporate governance significantly affects the financial performance of insurance firms. In particular, the findings showed that board composition negatively and significantly affects financial performance. This implied that insurance firms with a bigger ratio of non-executive directors do not perform better than those with a less proportion of non-executive directors. Insurance firms should therefore reduce the ratio of non-executive directors in order to achieve better performance. The results also showed that board diversity positively and significantly affects financial performance. This implied that insurance firms with a bigger ratio of professional directors perform better than the firms with less proportion of professional directors to the board. Insurance firms should therefore engage more professional directors in order to provide professional guidance and enhance financial performance. The findings also indicated that board independence positively and significantly affects financial performance. This implied that firms with a bigger ratio of independent directors perform better than those with a smaller proportion of independent directors. Insurance firms should thus ensure that the board has an adequate number of independent directors in order to ensure independent or unbiased board decisions that will boost financial performance. The results also indicated that board size negatively and significantly affects financial performance. This implied that firms with bigger board sizes do not perform better than firms with smaller board sizes. The board size should thus be smaller to ensure efficiency and effectiveness of the board and better financial performance. This study concludes that proper corporate governance structure significantly affects the performance of a firm. Therefore, the study recommends that directors and other stakeholders should put in place appropriate governance structures in order to boost financial performance. Regulators and policymakers should also come up with policies and regulations that will ensure firms adopt appropriate governance structures to enhance performance. This study contributes to corporate governance literature by providing insight on the effect of corporate governance on performance from a developing country perspective. The study also provides an empirical examination of the effect of the various governance structures adopted by insurance firms and gives recommendations that can be utilized by policymakers in assessing and reviewing corporate governance policies. The study also gives recommendations to managers and other stakeholders regarding the board structure that can be adopted to boost the performance of a firm.Isaac Kibet KiptooSamuel Nduati KariukiKennedy Nyabuto OcharoTaylor & Francis Grouparticlecorporate governanceboard independenceboard compositionboard diversityboard sizefinancial performanceBusinessHF5001-6182Management. Industrial managementHD28-70ENCogent Business & Management, Vol 8, Iss 1 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	corporate governance board independence board composition board diversity board size financial performance Business HF5001-6182 Management. Industrial management HD28-70
spellingShingle	corporate governance board independence board composition board diversity board size financial performance Business HF5001-6182 Management. Industrial management HD28-70 Isaac Kibet Kiptoo Samuel Nduati Kariuki Kennedy Nyabuto Ocharo Corporate governance and financial performance of insurance firms in Kenya
description	This study examined the relationship between corporate governance and the financial performance of insurance firms in Kenya over the period 2013–2018. The data were collected from 51 Insurance firms licensed to operate in Kenya as of 31 December 2018. Regression analysis was used and the results showed that corporate governance significantly affects the financial performance of insurance firms. In particular, the findings showed that board composition negatively and significantly affects financial performance. This implied that insurance firms with a bigger ratio of non-executive directors do not perform better than those with a less proportion of non-executive directors. Insurance firms should therefore reduce the ratio of non-executive directors in order to achieve better performance. The results also showed that board diversity positively and significantly affects financial performance. This implied that insurance firms with a bigger ratio of professional directors perform better than the firms with less proportion of professional directors to the board. Insurance firms should therefore engage more professional directors in order to provide professional guidance and enhance financial performance. The findings also indicated that board independence positively and significantly affects financial performance. This implied that firms with a bigger ratio of independent directors perform better than those with a smaller proportion of independent directors. Insurance firms should thus ensure that the board has an adequate number of independent directors in order to ensure independent or unbiased board decisions that will boost financial performance. The results also indicated that board size negatively and significantly affects financial performance. This implied that firms with bigger board sizes do not perform better than firms with smaller board sizes. The board size should thus be smaller to ensure efficiency and effectiveness of the board and better financial performance. This study concludes that proper corporate governance structure significantly affects the performance of a firm. Therefore, the study recommends that directors and other stakeholders should put in place appropriate governance structures in order to boost financial performance. Regulators and policymakers should also come up with policies and regulations that will ensure firms adopt appropriate governance structures to enhance performance. This study contributes to corporate governance literature by providing insight on the effect of corporate governance on performance from a developing country perspective. The study also provides an empirical examination of the effect of the various governance structures adopted by insurance firms and gives recommendations that can be utilized by policymakers in assessing and reviewing corporate governance policies. The study also gives recommendations to managers and other stakeholders regarding the board structure that can be adopted to boost the performance of a firm.
format	article
author	Isaac Kibet Kiptoo Samuel Nduati Kariuki Kennedy Nyabuto Ocharo
author_facet	Isaac Kibet Kiptoo Samuel Nduati Kariuki Kennedy Nyabuto Ocharo
author_sort	Isaac Kibet Kiptoo
title	Corporate governance and financial performance of insurance firms in Kenya
title_short	Corporate governance and financial performance of insurance firms in Kenya
title_full	Corporate governance and financial performance of insurance firms in Kenya
title_fullStr	Corporate governance and financial performance of insurance firms in Kenya
title_full_unstemmed	Corporate governance and financial performance of insurance firms in Kenya
title_sort	corporate governance and financial performance of insurance firms in kenya
publisher	Taylor & Francis Group
publishDate	2021
url	https://doaj.org/article/b7d3e0d2c61b4005b76ec6102d0e5b61
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Corporate governance and financial performance of insurance firms in Kenya

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