Influence of Corporate Governance Factors On Financial Performance of Dairy Co-Operative Societies in Meru County-Kenya

Abstract

It is important to address the increased default in application of governance principles in firms, corporations and societies. Incidences of insider trading, disregard of transparency and disclosure regulations and misappropriation of investors’ funds by the management have been on the increase. These can be stemmed by strict observance of corporate governance principles therefore this study looks at the adoption and practices of corporate governance factors in Dairy Co-operative Societies. The purpose of this study was to determine influence of governance factors on financial performance of Dairy Co-operative Societies. Specifically, the study sought; to establish influence of internal controls on financial performance of dairy Co-operative societies, to assess influence of board responsibility on the financial performance of dairy Co-operative societies, to determine influence of transparency and disclosure on the financial performance of dairy Co-operative societies, to investigate influence of risk management on the financial performance of dairy Co-operative societies. To explain the principles behind the relationship between the variables, the study was anchored on the stewardship and stakeholder’s theories. The target population of the study was the managers’ and Board Members of Dairy Co-operative Societies in Meru County. The study adopted a descriptive research design and made use of purposive sampling to generate a sample of 72 respondents. A questionnaire was utilized to collect data from the respondents. Data was analyzed and evaluated through the use of descriptive statistics like standard deviation mean and percentages, and made use of ordinary linear regression models to generate the size of effects of independent variables on the dependent variable. Analyzed data was presented in tables and pie charts. The response rate of the administered questionnaires stood at 88.88%. This response rate was found to be sufficient for inferential statistical analysis. After running the regression model the coefficient of determination was at 79.6 %, an indicator that the four explanatory variables explained more than 79.6 percent of variance in the financial performance of Dairy Co-operative Societies in Meru County. The study indicates that internal controls, board responsibility, transparency and disclosure, and risk management are important in influencing the financial performance of Dairy Co-operative Societies in Meru County. This study therefore, recommends the implementation of internal control mechanisms, risk management strategies, adherence to transparency and disclosure regulations in all Dairy Co-operative Societies in Meru County. The findings of this study are of benefit to the practitioners in the co-operative sector, policymakers and researchers in the field of corporate governance.