THE EFFECT OF CORPORATE GOVERNANCE ON DEBT MANAGEMENT OF DEPOSIT TAKING SAVINGS AND CREDIT COOPERATIVES IN KENYA

ABSTRACT 
This study sought to examine the effect of corporate governance on debt management of deposit taking Savings and Credit Cooperatives(SACCOs) licensed by Sacco’s Societies Regulatory Authority (SASRA) in Kenya. The objectives of the study was to, determine the effect of board composition on debt management, to establish the effect of CEO duality on debt management, to establish effect of director’s remuneration on debt management, to determine effect of board size on management of debt, and establish effect of board meeting on debt management. The study employed a descriptive research design. The target population for this study was 135 deposit taking SACCOs licensed by SASRA in Kenya for the period 2011- 2014. The study employed a purposive sampling method and used a sample size of Twenty seven (27) SACCOs that have been in operation and registered by SASRA since 2011 to 2014. Secondary data for this study was collected from the financial statements reported to SASRA for the period of 2011-2014. Collected data was analyzed using both descriptive and inferential statistics. Mean and standard deviations was used as measures of central tendencies and dispersion respectively. Correlation analysis was used to analyze the degree of relationship between the variables in the study. Further, regression analysis was used to describe the relationship between corporate governance and debt management. Analyzed data was presented using graphs, tables and charts. The findings show that corporate governance explains only a small proportion of changes in debt management as shown by lower coefficient of determination (R2 of 0.119 for Model 1, 0.164 for Model 2 and 0.030 for Model 3). ANOVA tests and regression analysis of the three models indicated that the impact of corporate governance on debts management as measured by debt ratio, debt/equity ratio and interest cover was not statistically significant at 0.05 level of significance (Model 3, p = 0. 8154 with an F value of 0.44, Model 2, p= 0.5463 with an F value of 0.82.Model 1, p = 0.7233 with an F value of 0.57). Therefore, this study fails to reject the null hypothesis that that there is no significant effect of corporate governance on debt management of Deposit taking Sacco’s in Kenya licensed by SASRA.

CHAPTER ONE 
INTRODUCTION 
Background of the study 
Most of the problems bedeviling co-operatives arise from bad governance and poor economic management. While leaders direct and control the organizations, and managers run them, members have authority to demand and enforce good governance in their organizations. Corporate governance principles seek to ensure that leaders act in the best interest of the organization that they lead in order to achieve the objectives for which they were founded. As the world moves towards this governance approach, co-operative societies are no exception. If co-operatives have to remain commercially viable and sustainable enterprises for socio- economic development, they must embrace good corporate governance. Co-operatives are governed and managed by elected committees. These committees are entrusted with the management of societies on behalf of members and employ managers and staff to carry out the day-to-day functions of the societies (Wambua, 2011) 

Savings and Credit Cooperative (Sacco’s) have been playing a key role in improvement of socio economy of citizens of different countries in the world. The Sacco’s members are able to save and access cheaper credit. Members are able to expand their businesses with the ultimate goal of elevating their living standards. Thus, corporate governance in cooperative societies is necessary to promote better standards of management through observance of core principles, values and procedures. The success of a cooperative enterprise is positively related to effective leadership (Klapper& Love, 2002). 

Corporate governance is defined as the process and structure used to direct and manage business affairs of the Company towards enhancing prosperity and corporate accounting with the ultimate objective of realizing shareholder long term value while taking into account the interest of other stakeholders (CMA Act, 2002). Some SACCOs have faced liquidation because the mechanisms and structures put in place were unethical leading to their collapse sinking with members’ money. Deposit-taking SACCOs are prerequisites for savings mobilization among the low income households who have limited access to mainstream commercial banks. They represent a major element of the financial system and provide services to a large number of low income households in Kenya. 

Deposit taking SACCOs has a unique advantage in that their clients are also shareholders. They should therefore undertake aggressive deposit mobilization, creation of internal incentives to attractive savings, insurance programmes to cover member’s savings and loans. Good corporate governance in these SACCOs would ensure better performance. Good corporate governance practice has been suspected to be the driver of survival of SACCOs in Kenya. Therefore this study is sought to investigate the impact of corporate governance on debt management of deposit taking SACCOs in Kenya.

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Item Type: Kenyan Postgraduate Material  |  Attribute: 60 pages  |  Chapters: 1-5
Format: MS Word  |  Price: KSh900  |  Delivery: Within 30Mins.
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