Corporate Governance Practices and Firm Value of Listed Commercial Banks in Kenya

Abstract

Corporate governance has become a global concern. The significance of corporate governance practices cannot therefore, be downplayed as they are strong determinants in the survival or collapse of corporate bodies. The study examined the relationship between corporate governance practices and firm value of listed commercial banks in Kenya for the period of 2011 to 2016. The study used a descriptive research design. Data was collected from financial statements available in published annual reports and websites for the 11 banks listed on the Nairobi Securities Exchange. Data was analyzed using descriptive and inferential statistics with the aid of STATA, 13. The results depict a positive and significant relationship with regards to board size, board independence and audit committee with firm value. Ownership concentration was found to have a negative but significant relationship with firm value. The study concluded that good governance structures are important for a stable financial market and that firms with good corporate governance enhance their market value. The study recommended that for banks to have sustainable growth and stability, regulators should improve on the mechanisms of ensuring that the corporate governance disclosures in the annual reports are not simply statement of good intentions but are implemented at firm level. The shareholders should also continue holding the board accountable in a way that strengthens the corporate governance practices.