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Moderating Effect Of Sacco Size On The Nexus Between Governance Costs And Financial Soundness Of Deposit Taking Saccos In Nairobi City County, Kenya

Author

Listed:
  • MAINA, Justus Nderitu

    (Department of Business and Economics, School of Business, Karatina University, Karatina, Kenya)

  • NDWIGA, Peter Musangi

    (Co-operative and Agribusiness Management Department, School of Business & Economics, The Co-operative University of Kenya, Nairobi, Kenya)

  • KINYARIRO, Dickson Kamau

    (Accounting and Finance Department, School of Business & Economics, The Co-operative University of Kenya, Nairobi, Kenya)

Abstract

In an effort to reduce agency problems the members of Deposit Taking Savings and Credit Co-operatives elect board of directors to offer governance in attaining their economic, social and cultural needs. Nevertheless, governance costs have increased by 36 percent since 2014 to 2019 leading to reduction in surpluses which have rendered an aggregate of 47.32 percent of the Deposit Taking Savings and Credit Co-operatives financially unsound, thus putting 341-billion-member savings at risk. This necessitated the assessment of the moderating effect of SACCO size on governance costs and financial soundness. A descriptive cross-sectional survey design was adopted where data collection sheet was used in secondary data collection. A binary logistic regression results established that with presence of a moderator in the nexus between predictor and response variable, the strength of relationship between variables registered a significant change (15.6 percent to 18.3 percent) as well as with introduction of interaction term (15.6 percent to 19.3 percent). The study concluded that SACCO size portrayed a statistically significant moderating effect between predictor variable and response variable. The study recommends that small size Deposit Taking Savings and Credit Co-operatives should merge with other Deposit Taking Savings and Credit Co-operatives who are of a similar common bond or interest to form larger Deposit Taking Savings and Credit Co-operatives in term of Size so as to achieve financial soundness.

Suggested Citation

  • MAINA, Justus Nderitu & NDWIGA, Peter Musangi & KINYARIRO, Dickson Kamau, 2021. "Moderating Effect Of Sacco Size On The Nexus Between Governance Costs And Financial Soundness Of Deposit Taking Saccos In Nairobi City County, Kenya," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 25(2), pages 37-49, June.
    • Handle: RePEc:vls:finstu:v:25:y:2021:i:2:p:37-49
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    References listed on IDEAS

    as
    1. Beatriz Marulanda & Jacques Trigo Loubière & Síncrito Cifuentes & Robert Peck Christen & Glenn D. Westley & Jeffrey Poyo & Lee Arbuckle & Carlos Heller & Christopher Baker & Alejandro Vargas Durán & D, 2000. "Safe Money: Building Effective Credit Unions in Latin America," IDB Publications (Books), Inter-American Development Bank, number 79523 edited by Glenn D. Westley & Brian Branch, February.
    2. repec:idb:brikps:79523 is not listed on IDEAS
    3. Allen, Emma. & Maghimbi, Sam., 2009. "African cooperatives and the financial crisis," ILO Working Papers 994457803402676, International Labour Organization.
    4. Sajid, Gul & Muhammad, Sajid & Nasir, Razzaq & Farman, Afzal, 2012. "Agency cost, corporate governance and ownership structure: the case of Pakistan," MPRA Paper 42418, University Library of Munich, Germany.
    5. Allen, Emma & Maghimbi, Sam., 2009. "African cooperatives and the financial crisis," ILO Working Papers 995018691602676, International Labour Organization.
    6. repec:ilo:ilowps:445780 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    governance costs; SACCO size; stewardship theory; deposit taking savings and credit co-operatives;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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