Corporate governance, capital structure and financial performance of commercial banks

Abstract

The purpose of the study was to establish the relationship between corporate governance, capital structure and financial performance. The study adopted a cross sectional design which was quantitative descriptive in nature. It involved descriptive and analytical research designs. The study sample comprised of 21 commercial banks selected by simple random sampling and 130 respondents who were selected through purposive sampling. The data was tested for reliability, analyzed using SPSS and results presented based on the study objectives.

Results revealed a significant positive relationship between corporate governance and capital structure, capital structure and financial performance, and corporate governance and financial performance. Findings further indicated that corporate governance was a better predictor of financial performance in banks. This implies that banks should put in place mechanisms that ensure proper implementation of corporate governance practices. The study concluded that corporate governance and capital structure significantly affect financial performance in banks. Therefore the researcher recommended that banks should have operational governance mechanisms in place which could shape the choice of financing hence resulting to better financial performance.