Influence Of Macro Environment And Top Management Demographics On The Relationship Between Enterprise Risk Management And Performance Of Kenyan State Owned Corporations

Abstract

This study was a conceptualization of the relationship between Enterprise risk management (ERM), macro environment, Top management demographics (TMD) and organizational performance. Some researchers have argued that Enterprise risk management has a positive influence on performance while others have advanced that the influence is negative, whereas others have contended that this strategic management practice is fairly recent and its effect is yet to be fully realized. There is also no agreement on the moderating influence of both macro environment and Top management demographics on the relationship between Enterprise risk management and performance. Additionally, the moderating influence of macro environment on the relationship between Enterprise risk management and organizational performance has been inconclusive. It was for this reason, that there was need to explore the existence of such relationships. The study context was Kenya state-owned corporations. The general objective of the study was to establish the relationship between Enterprise risk management, Top management demographics, macro environment and the performance of Kenya state-owned corporations. Arising from this broad objective, the specific objectives were to: 1) Investigate the influence of Enterprise risk management on the performance of state corporations; 2) determined the moderating influence of macro environment on the relationship between Enterprise risk management and performance of the state corporations; 3) examine the moderating influence of Top management demographics on the relationship; 4) determine the joint influence of Enterprise risk management, Top management demographics and macro environment on the performance of the state corporations. The study applied a cross sectional survey design and use of structured questionnaire and collected data from 92 state corporations. Descriptive and inferential statistics were used to analyze the data. Hypotheses were tested using both simple and multiple regression analysis. Baron and Kenny model was used in testing the moderating effects. The study findings indicated that: 1) Enterprise risk management had a statistically significant influence on performance of Kenya owned state corporations; 2) Top management demographics significantly moderated the relationship between Enterprise risk management and performance; 3) Macro environment had no significant moderating influence on the relationship; 4). Enterprise risk management, Top management demographics and macro environment jointly significantly influenced performance of the state corporations. The results supported upper echelons theory, contingency theory of enterprise risk management and stakeholder’s theory. However, the results failed to support the proposition of open systems theory. The study makes significant contribution to knowledge by: 1) Validating the propositions of the Contingency theory of Enterprise risk management and establishing the significant positive influence of Enterprise risk management on organizational performance in the public sector context 2) Advancing the significant moderating influence of Top management demographics on the relationship between Enterprise risk management and performance and 3) establishing the significant joint effect of Enterprise risk management, Top management demographics and macro environment on performance. The study results will be valuable to policy makers in re-enforcing and adoption of Enterprise risk management in State-owned agencies, organizational leadership in integrating Enterprise risk management with organization-wide strategic management activities. The study suggests that future studies could adopt different research designs and investigate different contexts.