Effects of Corporate Governance on Financial Performance of Listed Insurance Firms in Kenya

David Wanyonyi Wanyama, Tobias Olweny


The main objective of this study was to investigate the effects of Corporate Governance on the financial performance of listed insurance companies in Kenya. Specifically, this study examined board size, board composition, CEO duality and leverage and how they affect the   financial performance of listed insurance Companies in Kenya.  Firm performance was measured using Return on Assets (ROA) and Return on Equity (ROE). This study adopted a descriptive research design. The study population was all those insurance Companies which were quoted on the Nairobi Securities Exchange as at December 2012.  The primary data were collected through the administration of questionnaires to the staff in these listed insurance firms. Stratified random sampling technique was used to obtain the sample staff for the purpose of administering questionnaires.  Secondary data were collected using documentary information from Company annual accounts for the period 2007 to 2011. Reliability test was carried out using Cronbach’s alpha model. Both descriptive and inferential statistics were used. Data was analyzed using a multiple linear regression model.


The study found that a strong relationship exist between the Corporate Governance practices under study and the firms’ financial performance. Board size was found to negatively affect the financial performance of insurance companies listed at the NSE. There was a positive relationship between board composition and firm financial performance. However, the most critical aspect of board composition was the experience, skills and expertise of the board members as opposed to whether they were executive or non executive directors. Similarly, leverage was found to positively affect financial performance of insurance firms listed at the NSE. On CEO duality, the study found that separation of the role of CEO and Chair positively influenced the financial performance of listed insurance firms.

Keywords: Corporate Governance, Insurance firms, Financial Performance



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ISSN (Paper)2224-5731 ISSN (Online)2225-0972

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