PILLARS OF CORPORATE GOVERNANCE, INVESTMENT POLICIES, GOVERNMENT REGULATIONS AND PERFORMANCE OF PENSION FUND MANAGERS IN KENYA

Abstract

Pension fund performance has received increased attention across the world with public pension fund performing dismally when compared to private pension fund. Pension funds' performance in Kenya has been facing myriads of challenges ranging from poor administration and investments of pension funds, lack of transparency and accountability, non-remittance of monthly contributions by employers, misappropriation of scheme assets by the trustees, loss of scheme funds through negligence of trustees and poor investment of the scheme assets. The broad objective of this study was to examine the relationships between pillars of corporate governance, investment policies, government regulations and performance of pension fund managers in Kenya. The study sought to determine the intervening effect of investment policies on the relationship between pillars of corporate governance and performance of pension fund managers in Kenya; to establish the moderating effect of government regulations on the relationship between pillars of corporate governance and performance of pension fund managers in Kenya; and to determine the moderation - mediator effect on the relationship between pillars of corporate governance and performance of pension fund managers in Kenya. Neoclassical theory, Q-theory, contingency theory and stakeholder theory was used in the study. This study adopted positivism philosophy. The study employed a cross-sectional survey design whereby access to the widest possible amount of data from the targeted Fund Managers in Kenya was sought. The population of interest of the study was 31 Fund Managers in Kenya licensed by RBA and CMA. The study used purely primary data sources. Primary data was obtained from the selected respondents. Primary data was collected through questionnaire. Regression analysis was used to establish the relative significance of each of the variables on the influence of pillars of corporate governance, investment policies, government regulations on the performance of pension fund managers in Kenya. The study findings indicated that there was significant relationship between pillars of corporate governance and performance of pension fund managers in Kenya. In addition, the findings indicated that there was a partial intervening effect of investment policies in the relationship between pillars of corporate governance and performance of pension fund managers in Kenya. There was a significant moderating effect of government regulations on the relationship between pillars of corporate governance and performance of pension fund managers in Kenya. Lastly, there was a significant moderation – mediator effect on the relationship between pillars of corporate governance and performance of pension fund managers in Kenya. The study concluded that pillars of corporate governance practices being implemented had been incorporated in the Pension Fund’s investment management decisions with its assets being more diversified and having enhanced reporting on investments. This implied that the adoption of the regulations from the regulatory bodies such as number of trustees, tax on non-exempt incomes of pension fund members, regulatory meetings, risk tolerance limits imposed by the RBA, competition as stipulated by RBA led to better performance. The study recommended on pension reforms, by creating a new class of potential activist shareholders in the form of pension funds, could in principle improve corporate governance and increased shareholder discipline. The study recommend that the pension fund managers must work with stakeholders to bring about a harmonized, workable and transparent legislative and institutional framework for the retirement benefits industry. Lastly, the study recommends that the governing body of the pension fund should set forth in a written statement and actively observe an overall investment policy.