Corporate Governance, Investment Strategy, Macroeconomic Factors and Financial Performance of Pension Schemes in Kenya: An Empirical Analysis

Background/Purpose: Literature review of pension schemes in Kenya reveals that there is lack of multi-factor analysis in Kenyan pension funds performance. This study examines the influence of corporate governance, investment strategy, and macroeconomic factors on the financial performance of pension funds in Kenya for the period 2012 to 2022. Methodology: The study used a mixed-methods approach that combined primary survey data with secondary macroeconomic data. Governance and investment strategy were measured through survey-based indices, while macroeconomic variables were sourced from national datasets. A multi-equation analytical framework assessed direct, mediating, and moderating effects. The analysis entailed testing for relationships between and among variables to establish their nature and magnitude. This involved multiple regression analyses, Pearson’s product moment and analysis of variance (Baron & Kenny, 1986). Key Findings: The findings show that corporate governance significantly enhances pension fund performance, with investment strategy mediating this relationship. Macroeconomic factors also significantly affect returns, though their impacts vary across variables. Highlight the specific results, such as the significant positive effect of corporate governance on performance and the critical mediating role played by investment strategy. Conclusion/Implications: The study contributes to pension finance and governance literature by extending Agency Theory, Stakeholder Theory, Modern Portfolio Theory, and Arbitrage Pricing Theory to a developing-country pension fund context, showing that these frameworks complement each other in explaining ROI. Empirically, the study provides evidence that CG, IS, and macroeconomic variables jointly influence pension fund performance. Stakeholder involvement has a strong positive effect, investment strategy mediates the governance-performance link, reinforcing theoretical expectations derived from Modern Portfolio Theory and macroeconomic factors moderate this relationship, aligning with propositions of Arbitrage Pricing Theory regarding the role of systematic risk factors. These findings should inform the decisions of fund managers and policymakers to ensure sustainable retirement security in Kenya.