Examining the Role of Regulatory Regime and Funding Structure on the Nexus between Corporate Governance and Financial Performance of Deposit Taking Sacco's in Kenya

Abstract

This study aimed to empirically investigate the relationship among corporate governance (CG), regulatory regime (RR), funding structure, and financial performance (FP) within deposit-taking Savings and Credit Cooperative Organizations (SACCOs) in Kenya. Utilizing a panel dataset from 163 SACCOs, the study assessed CG using metrics such as board size, board independence, board financial expertise, board diversity, and board activity. FP was measured through return on assets (ROA). The panel regression model was chosen for estimation following the Hausman specification test. The empirical results indicated a strong and statistically significant positive relationship among CG, regulatory regime, funding structure, and FP outcomes among the SACCOs studied. These findings suggest practical implications for policy development aimed at enhancing governance frameworks within SACCOs, potentially improving their operational efficiency and sustainability. They also underscore the strategic importance of board composition and activities in driving financial outcomes. Future research could explore the long-term effects of specific CG strategies, the impact of varied regulatory regimes across regions, and the role of emerging funding models like impact investing and digital finance on SACCOs' FP. Additionally, qualitative studies could provide deeper insights into governance practices and stakeholder trust, while examining technological advancements and digital transformation could offer valuable perspectives on future industry trends and adaptation strategies.

Keywords: corporate governance, regulatory regime, funding structure, financial performance, deposit taking Sacco’s