Corporate Governance and Financial Performance of Reinsurance Corporations in Kenya

Abstract

Financial performance of Reinsurance firms is important in any economy and financial performance plays significant role in the country's economic welfare. This study sought to explore how financial performance of Reinsurance Corporation in Kenya is affected by the corporations' corporate governance. The concept of corporate governance was measured in terms of board size, board Composition, board independence, and chief executive officer's Duality. A population of seven (7) reinsurance companies with physical presence in Kenya was targeted for the study through casual research design. This study used secondary data, where data on board size, board Composition, board independence, Chief executive officer and Return on asset was gathered through review of published audited annual reports of the seven selected reinsurance Companies for the period of study 2013 to 2017 financial year. The research adopted regression analysis to establish the extent to which financial performance of reinsurance companies is influenced by the companies' corporate governance practices. Corporate governance in regard to Chief Executive Officer duality, board independence, board composition, and board size was found to have a significant effect on the financial performance of reinsurance corporations in Kenya. Size of the board size was established to have a positive significant relationship with the corporations' financial performance. A similar relationship was found to exist between composition of the corporations' board of directors and their financial performance. Further, the study revealed a positive significant relationship between independence of the board and financial performance measures of Return on Assets. Following findings of the analyses, the study recommends the Reinsurance Corporations in Kenya to stick to the recommended board size, board composition, board independence and Chief Executive Officer duality.