Moderating Effect of Financial Gearing on the Relationship Between Corporate Governance, Ownership Structure and Financial Performance of MFIS in Kenya

The purpose of the study was to evaluate the moderating effect of financial gearing on the relationship between corporate governance, ownership structure, and financial performance of MFIs in Kenya. This study adopted a correlational research design within a quantitative framework. This study adopted a correlational research design within a quantitative framework. The study employed a census approach. The target population comprised the 14 deposit-taking MFIs licensed by the Central Bank of Kenya during the study period. However, only 12 institutions had complete audited financial statements covering the entire period from 2015 to 2022. Therefore, all 12 eligible institutions were included in the analysis, while the remaining two were excluded because of incomplete data.  Data were analysed using STATA statistical software. Financial gearing positively moderates the relationship between corporate governance and financial performance of MFIs in Kenya (BR × FG: β = 31.34900, p = 0.0280). The coefficient of the interaction term between foreign representation and financial gearing (FR × FG) was positive and statistically significant (β = 2.111630, p = 0.0212). This implies that financial gearing significantly moderates the relationship between ownership structure and financial performance of MFIs in Kenya. The interaction term between board remuneration and financial gearing (BR×FG) yielded a negative and statistically significant coefficient (β = -0.125696, p = 0.0011). This finding indicates that financial gearing significantly moderates the relationship between corporate governance and financial performance among MFIs in Kenya. The study concludes that financial gearing significantly moderates the relationship between corporate governance, ownership structure, and financial performance. This means that an MFI's different levels of debt will significantly affect how governance structures impact the firm’s profitability. Similarly, different levels of debt affect the impact of ownership structure on the firm's profitability.