Table of Contents
1.0 Background of the Study
1.1 Statement of the Problem
1.2 Purpose of the Study
1.3 Research Questions
1.4 Importance of the Study
1.5 Scope of the Study
1.6 Chapter Summary
2.0 Literature Review
2.2 Research Question 1: Is the CEO also the Board Chairman?
9 2.2.1 Corporate Governance
2.3 Research Question 2: Are there board committees in the board of directors?
10 2.3.1 Board of Directors
2.3.2 Board Structure
2.3.3 Board Committees
220.127.116.11 The Audit Committee
18.104.22.168 The Compensation Committee
22.214.171.124 The nomination Committee
2.4 Research Question 3: Does Standard Investment Bank provide financial statements to its investors?
15 2.4.1 Regulators and Professional Bodies
126.96.36.199 Legislative Law
188.8.131.52 The Nairobi Stock Exchange
184.108.40.206 Capital Markets Authority
220.127.116.11 Institute of Certified Public Accountants of Kenya (ICPAK)
18.104.22.168 Institute of Certified Public Secretaries of Kenya (ICPSK)
2.5 Chapter Summary
3.0 RESEARCH METHODOLOGY
3.2 Research Objectives
3.3 Research Design
3.4 Population and Sampling Technique
22.214.171.124 Sampling frame
126.96.36.199 Sample size
3.5 Data Collection Method
3.6 Research Procedures
3.6.2 Request for Research Participation
3.6.3 Survey Questionnaire
3.7 Data Analysis Method
3.8 Chapter Summary
Background of the Study
In Kenya, the Nairobi Stock Exchange (NSE) provides a link between the buyers and sellers of shares. The Nairobi Stock Exchange acts a market where excess funds can be channeled to companies that need these resources. To facilitate the trade, brokerage firms have been incorporated to aid both the buyers and sellers of shares in making important investment decisions. The investment banks provide crucial information and advice to the investors on when to buy or sell shares and the type of company shares to trade in. The investment banks also act as a depository institution where investors can open accounts and deposit money for trading.
Recently, reports about financial scandals at brokerage firms have been reported in media. Two brokerage firms Nyaga Stock Brokers and Ngenye Kariuki Stock Brokers were involved in malpractices that included trading in clients shares without prior consent from the investors. A common trait between the two brokerage firms was that they both operated with negative operating incomes and very weak balance sheets. These events have shaken investor confidence and led to question the integrity and honesty of brokerage firms.
To restore investor confidence in the brokerage firms and the Nairobi Stock Exchange, there is need for the brokerage firms to report and disclose their financial information to their investors. These will provide much needed information to investors in choosing which brokerage firm to solicit services. In addition, the brokerage firms should also adopt good governance through implementation of regulations in corporate governance.
In other more developed stock markets, financial reporting and disclosure by brokerage firms is a mandatory practice that is governed by laws and regulations. In developed markets, it has been established that the majority of cases of corporate fraud by brokerage firms are undertaken through non-disclosure of financial information. Preventive measures have been put in place to prevent non-disclosure of financial information from becoming a major avenue of theft of investors’ assets. Loopholes of embezzlement and looting have been identified and amended in the existing laws and regulations by the relevant institutions in government and the private sector.
Good governance includes full disclosure of information regarding a company’s policies,...
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