Effect of Social Inclusion in Cooperative Governance on Financial Performance of Agricultural Co-operatives in Kenya

Abstract

This study investigated the impact of social inclusion in corporate governance on the financial performance of agricultural cooperatives in Kenya, with a focus on how legislative frameworks moderate this relationship. Social inclusion in corporate governance refers to the involvement of diverse members in the governance structures and decision-making processes within cooperatives. The research aimed to evaluate whether enhanced social inclusion in governance contributes to better financial outcomes for these cooperatives and how legislation influences this effect. Utilizing a quantitative approach, the study analyzed data from 31 agricultural cooperatives in Kiambu and Kajiado counties, Kenya. The analysis encompassed a sample of 57,640 members, with financial performance metrics assessed over a five-year period from 2019 to 2023. Regression analysis was employed to determine the direct impact of social inclusion in corporate governance on financial performance and to examine the moderating role of legislative frameworks. The results demonstrated a strong positive relationship between social inclusion in corporate governance and financial performance. The regression model yielded an R value of 0.846 and an R Square of 0.717, indicating that social inclusion in corporate governance accounted for 71.7% of the variance in financial performance. This finding was supported by ANOVA results, which revealed an F-value of 1013.681 and a p-value of 0.000, confirming the significance of this relationship. Further analysis assessed the moderating effect of legislation on the relationship between social inclusion in corporate governance and financial performance. The moderating model showed an R value of 0.862 and an R Square of 0.743, reflecting a substantial explanatory power. The ANOVA results, with an F-value of 1161.891 and a p-value of 0.000, indicated that legislation significantly enhances the positive impact of social inclusion in corporate governance on financial performance. In conclusion, the study highlights that social inclusion in corporate governance is a crucial factor influencing the financial performance of agricultural cooperatives, with legislation playing a significant moderating role. The findings underscore the importance of inclusive governance practices and supportive legislative frameworks in enhancing the financial sustainability and effectiveness of agricultural cooperatives.