Corporate Governance and Efficiency of Retirement Benefits Schemes in Kenya

Abstract

This paper endeavored to establish the effect of corporate governance on the efficiency of retirement benefits schemes in Kenya. Agency theory, stakeholder theory, financial distress theory, and transactional cost theory buttressed the study. The study employed a quantitative research design, utilizing panel regression analysis to test the hypotheses. Data was collected from 896 observations across 128 retirement benefit schemes in Kenya, covering a seven-year period from 2015 to 2021. The research findings revealed that employee representatives on the board significantly and positively influenced the efficiency of retirement benefit schemes. Conversely, independent board members were found to have a negative effect on efficiency, suggesting potential challenges such as conflicts or slower decision-making processes. This study contributes to agency theory by providing empirical evidence that highlights the complexities of board composition in aligning the interests of managers and stakeholders within retirement benefit schemes. For policymakers, the study recommends the development of regulations that mandate or strongly encourage the inclusion of employee representatives on the boards of retirement benefits schemes.