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Corporate governance, financial performance and firm Value: a case of commercial banks in Kenya

Author

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  • Evans Machero Ochego

    (Department of Accounting and Finance, Kenyatta University, Nairobi, Kenya)

  • Job Omagwa

    (Department of Accounting and Finance, Kenyatta University, Nairobi, Kenya)

  • Stephen Muathe

    (Department of Business, Kenyatta University, Nairobi, Kenya)

Abstract

Firm value is dependent on corporate which leads to increased value. High valued firms attract more investors. Towards firm value protection, minimum capital requirements were raised by the Central Bank of Kenya from 250 million to 1 billion shillings on commercial banks to cushion bank shareholders value. Despite the increased oversight and regulatory efforts on corporate governance to protect and enhance firm value, some commercial banks have recorded low firm value. Hence, this study sought to investigate the mediating effect of financial performance on the relationship between corporate governance and firm value of commercial banks in Kenya. The study was anchored on Agency Theory. Explanatory research design was adopted. Target population was forty four Kenyan commercial banks, where a census was conducted. Secondary data was collected from published financial statements and bank websites for the period 2009 to 2018. STATA version 13.0 was used for data analysis. Descriptive and inferential statistics specifically panel regression was used in data analysis. The study findings established that there is a statistically significant effect between financial performance and firm value of commercial banks in Kenya. Therefore, the study concluded that firms with good financial performance have high firm value. And as such, these calls for the management of the commercial banks improve financial performance which will go a long way in improving firm value. There is also need for Central bank of Kenya, Capital Markets Authority and Nairobi Securities Exchange to emphasize on corporate governance and short term goals to enable achievement of long term goals.

Suggested Citation

  • Evans Machero Ochego & Job Omagwa & Stephen Muathe, 2019. "Corporate governance, financial performance and firm Value: a case of commercial banks in Kenya," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 8(4), pages 41-48, October.
    • Handle: RePEc:rbs:ijfbss:v:8:y:2019:i:4:p:41-48
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    References listed on IDEAS

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    1. Dulacha G. Barako & Phil Hancock & H. Y. Izan, 2006. "Factors Influencing Voluntary Corporate Disclosure by Kenyan Companies," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(2), pages 107-125, March.
    2. Nelson Waweru, 2014. "Determinants of quality corporate governance in Sub-Saharan Africa: Evidence from Kenya and South Africa," Managerial Auditing Journal, Emerald Group Publishing, vol. 29(5), pages 455-485, May.
    3. Igor Filatotchev & Mike Wright, 2011. "Agency Perspectives on Corporate Governance of Multinational Enterprises," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 471-486, March.
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    Cited by:

    1. Anggita Langgeng WIJAYA & Ima Widha RATNASARI, 2023. "The Effect of the Audit Committee on the Firm Value of State-Owned Enterprises in Indonesia: The Mediation Role of Financial Performance," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(6), pages 60-72, June.

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