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.