The Mediating Effect of Firm Revenue on the Relationship Between Board Characteristics on Financial Distress of Deposit Taking Saccos in Nairobi County, Kenya

Abstract

The upper Echelons Theory reiterates the importance of top management in an organization and recognizes that the mangers make decisions that grow the entity. Before the establishment of this theory, the premise was that larger firms which drive high amounts of income, are capable of running themselves without failure. Although Organizations that command large amounts of income are deemed to be successful the upper echelons theory holds that these entities cannot be successful without proper management and guidance by top management where the board of directors in this case is considered as top management organ for SACCOs. Savings and Credit Cooperatives (SACCOs) have evolved over time from mobilizing savings and granting loans to become established entities that provide banking services to their customers. They require good governance to avoid the experience of financial distress. The current research was therefore aimed at establishing the influence of firm revenue on the relationship between board characteristics and financial distress of deposit taking SACCOs in Nairobi County. Large entities command more revenue as compared to small firms. Board Characteristics is of importance to this study because it influences Corporate Governance which according to previous research has shown that the practice helps revolutionize performance of various institutions. The study is guided by upper echelons theory which reiterates the importance of top management. 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 and findings were presented using tables. The study concluded that firm revenue does not mediate the relationship between board characteristics and financial distress of Deposit Taking SACCOs. Though firm revenue should be enhanced, governance should be improved since it remains a critical success factor in alleviation of financial distress.

Board Diversity and Efficiency of Universities Registered in Kenya: The Role of Funding Sources

“…At the contextual level, mixed findings can be traced to sectorial disparities and variation between the developed and the developing markets based on regulatory, economic, political and cultural settings. A study by Nguta and Ndegwa (2021) was carried out in a SACCO context and established that the firm revenue did not serve as a mediator between board characteristics and financial stability, while a study that was undertaken by Coupet (2017) established that funding sources mediated the connection between board diversity and institutional efficiency in the United States. Scholars have varied views on the connections between board diversity and efficiency in a corporate setup; it is, however, puzzling to notice the limited work on this relationship within a university setup.…”