Effect of corporate governance on total income due to nonperforming asset portfolios in the banking sector: a case of commercial banks in Kenya

Abstract

It’ s argued that corporate governance can be linked to total income due to non performing asset portfolios (NPAs) in commercial banks in Kenya but this has not been determined empirically. Information is lacking on effect of corporate governance on total income due to NPAs among these banks. The study sought to establish effect of corporate governance on total income due to NPAs, among these banks. The study was guided by a Shareholder theory in which the independent variable is corporate governance and dependent variable is total income due to NPAs. Correlational survey design was employed in the study. The target population was 43 heads of credit of the banks operating in Kenya from 2005 to 2012. Simple random sampling technique was used to select a sample size of 24 heads of credit. Secondary data was collected through review of records of the banks, reports, journals and books. Primary data was obtained from respondents through a questionnaire and interview schedule. Instrument reliability stood at Cronbach’s Alpha of 0.65. The objective was analyzed using regression analysis. Results for the objective showed a1, a2 and a3 as 0.102(p=0.639), 0.288(p=0.193) and 0.105(p=0.631) respectively. This means that a unit change in standard deviation in efficiency for example causes 0.105 standard deviations in total income, insignificantly. R-Square results was 0.128 for total income model. This implies the model is stable and valid for prediction at 12.8%.