Relationship between Frequency of Board Meetings and Performance of Commercial Banks in Kenya

Abstract

Commercial banks play a major role of collecting investment capital in search of good returns. Commercial banks collect capital and allocate in a way that the board believes that will offer good returns. When the returns are good then it is perceived the bank has made profits. Since the board is involved directly in decision making of collection and allocation of the capital in order to make profits, the need for sound corporate governance practices is critical in enhancing performance and stability in the banking sector. Research on connections between corporate governance practices and commercial banks’ performance in terms of profitability has been scanty. This paper explores the issue, directing more attention on the relationship between number of board meetings and the performance of commercial banks in terms of profits in Kenya for the year 2016. Secondary data was obtained from a sample of 28 out of the 43 commercial banks’ published financial statements for the year 2016, and also the published general reports from the banks’ websites. Bank performance was defined by one key performance variable, namely Net profit. These are the most important measures of Banks’ financial performance because they show what the shareholder takes home. Data collected was analyzed using Statistical package for the social sciences and multivariate regression model. The results indicated that board meetings negatively affected banks performance. Likewise, board size negatively affected the banks’ profits, while board independence enhanced Banks’ performance in terms of profits. The results further showed that Disclosure and Banks’ performance displayed no linear relationship.  Therefore, if commercial banks in Kenya intend to improve their performance in terms of profitability, they should direct their efforts on board independence and other variables other than disclosure.

Key words and abbreviations : C.E.O -Chief Executive Officer, NSE - Nairobi Security Exchange, OLS - Ordinary Least Square , PSICG- Public Sector initiative for corporate governance, ROA - Return on Asset , ROE - Return on Equity