Influence of Board Characteristics on Financial Distress of Deposit Taking SACCOs in Nairobi County, Kenya

Abstract

The importance of Savings and Credit Cooperatives (SACCOs) cannot be underestimated. Despite their importance, they are faced with numerous challenges among them financial distress which threatens their very existence. The current research sought to establish the role of board characteristics in the financial distress suffered by Deposit Taking SACCOs in Nairobi County. The study is anchored inter alia on Agency Theory. Descriptive research design was adopted while Nairobi County was purposively chosen and a census was carried out on deposit taking SACCOs in the county. Secondary data was collected from SASRA using a data collection sheet and a panel data analysis performed using STATA software. The findings were presented using tables. The study concluded that there was a relationship between board characteristics and financial distress of Deposit Taking SACCOs where board composition, board education and board tenure have statistically significant and negative influence on financial distress. In conclusion SACCOs need to have lean boards, Board composition should also be improved by including more women on boards, there should be more inclusion of members with high and relevant education credentials, and SACCOs should have term limits for their members while an analysis too based on the Altman’s Z score models should be adopted for SACCOs. Another research may be carried out to establish other factors causing financial distress and how to turn around the SACCOs already in distress.

Kesulitan Keuangan: Efek Struktur Kepemilikan, Karakteristik Dewan Direksi, dan Indeks Tata Kelola Perusahaan

“…Pendidikan dewan direksi yang tinggi dan relevan dapat membantu perusahaan mengurangi risiko terjadi kesulitan keuangan (Munene et al, 2020). Hal tersebut bertolak belakang dengan pernyataan dari Sabli et al (2016), jika perusahaan tersebut merupakan perusahaan keluarga (Kanakriyah, 2021).…”

“…Munene dan Ndegwa (2021) mengatakan bahwa pendidikan dewan menjadi salah faktor dalam gagalnya mengurus manajemen, karena tidak memiliki kemampuan yang memadai dan dapat menurunkan kinerja perusahaan. Menurut Munene et al (2020), Kanakriyah (2021), dan Yousaf et al(2020) pengaruh pendidikan dewan direksi memberikan pengaruh negatif terhadap kesulitan keuangan. Singhal et al (2021) dan Wicaksono (2022) mengatakan adanya pengaruh positif terhadap kesulitan keuangan.…”

“…Nilai tersebut menunjukkan bahwa variabel bebas dan variabel kontrol mampu menjelaskan 73,75% perubahan variabel kesulitan keuangan. Variabel independen yang belum digunakan dalam penelitian ini antara lain board tenure (Munene et al, 2020), komite audit (Pujakusum & Sinarti, 2019), komisaris independen (Candradewi & Rahyuda, 2021), direksi remunerasi (Sewpersadh, 2022), dan keragaman kebangsaan dewan direksi (Kanakriyah, 2021). 1.0487 0.0000 Signifikan + -𝑌 = 1,6286 − 0,8544𝑋1 − 1,5601𝑋2 + 0,3615𝑋3 − 0,0838𝑋4 − 0,4710𝑋5 + 0,0647𝑋6 + 0,9653𝑋7 − 0,3104𝑋8 + 0,0028𝑋9 + 0,3057𝑋10 − 0,2295𝑋11 − 0,0530𝑋12 + 0,1568𝑋13 + 0,0487𝑋14 + 1,0487𝑋15…”

“…Pendidikan direksi yang tinggi juga membantu meningkatkan kualitas kinerja direksi, dikarenakan latarbelakang pendidikan yang membantu para direksi melihat lebih luas dari suatu permasalahan. Berdasarkan hasil pengujian tersebut H8 diterima dan sejalan dengan penelitian dari Munene et al (2020), Kanakriyah (2021), dan Yousaf et al(2020).…”

Governance Implementation on Financial Performance

“…The performance of the banking industry is an indication of the financial strength of any country. Financial performance as a performance measurement dimension has developed well in financial management (Wardianto et al, 2020), (Wilden, 20213), (Alkhatani, 2015), (Kasozi & Makina, 2021), (Munene et al, 2020), (Antwi, 2021). Measurement of financial performance indicators is needed to reveal various bank performance, were in this study using ROA (Returns on Assets), namely the extent to which the bank generates profits from assets that are operationalized.…”