Relationship Between Corporate Governance and the Performance of Insurance Companies in Kenya

The study was intended to investigate corporate governance and how it relates to firm performance of IRA licensed insurance companies, underwriting general business. The findings of the study were aimed to provide more knowhow in the industry which proved to lag behind despite the much potential for growth it is known to have. To achieve this, various elements of the board of directors, which is the main determinant of corporate governance were explored. These included the board composition, the size of the board and the frequency of the meetings. The cross sectional research design was used in the study to establish the relationship between corporate governance and the performance of insurance companies in Kenya. The population for the research was to cover all the 40 general business insurance companies. However, data from only 30 companies, which is 75% of the intended population was collected. This was the no. of directors, the frequency of the meetings and the composition of the boards, which were also the independent variables. Data on the net income and total assets from 2013 – 2016 was also collected for the 30 companies to derive the return on assets, the dependent variable. The study concluded that that there existed a relationship between corporate governance and firm performance, with the various independent variables showing influence on performance to different extents. With the collected data from the industry players, the board composition and the meetings‟ frequencies related positively with performance, such that an enhancement would improve on the performance. The board size on the other hand displayed a negative relationship to the performance. Ultimately, the results of this study prove that a greater bit of firm performance is not achievable in the absence of proper governance, and consideration to the board of directors and the decisions made to influence the firm processes, procedures and methods should be key. The study recommends that, policies made by firms should very much consider the structure of the board of directors upon recruiting and making decisions surrounding their roles and make up.