International Journal of Research In Business and Social Science (2019-10-01)

Effect of Audit Committee Independence on the Financial Performance of Insurance Firms in Kenya

  • Hassan Bashir Ibrahim,
  • Caren Ouma,
  • Jeremiah O. Koshal

DOI
https://doi.org/10.20525/ijrbs.v8i6.501
Journal volume & issue
Vol. 8, no. 6
pp. 15 – 24

Abstract

Read online

The aim of this study was to examine the effect of audit committee independence (ACI) on the financial performance of insurance firms in Kenya. The study analyzed data from the 55 insurance firms licensed by the Insurance Regularity Authority (IRA) in Kenya. ACI was operationalized by the number of independent directors serving on the boards of insurance firms operating in Kenya. Primary data was collected from a sample of 412 board directors, Chief Executive Officers (CEOs), Chief Finance Officers (CFOs), Audit Committee members (AUDIND) and Internal Auditors (INAUD) using a questionnaire instrument while secondary data was retrieved from audited financial reports of the year 2017. Data were analyzed using descriptive and inferential statistics. Firm performance was measured by the two accounting-based measures Return On Assets (ROA) and Return On Equity (ROE). The findings from the regression analysis indicate that audit committee independence significantly and positively affects the financial performance of insurance firms in Kenya.

Keywords