| dc.description.abstract | Good corporate governance contributes to a company's competitiveness and reputation, facilitates access to capital markets and thus helps develop financial markets and spur economic growth. Today, both domestic and foreign investors place an ever greater emphasis on the way that corporations are operated and how they respond to their needs and demands. Investors are increasingly willing to pay a premium for well-governed companies that adhere to good board practices, provide for information disclosure and financial transparency, and respect shareholder rights.
Well-governed companies are also better positioned to fulfill their economic, environmental, and social responsibilities, and contribute to sustainable growth. Improvement in corporate governance practices can improve the decision making process within and between a company's governing bodies, and should thus enhance the efficiency of the financial and business operations. Better corporate governance also lea.ds to an improvement in the accountability system, minimizing the risk of fraud or self-dealing by company officers.
An effective system of governance should help ensure compliance with applicable laws and regulations, and further, allow companies to avoid costly litigation. The purpose of this study is to examine corporate governance practices of companies listed at the Nairobi Stock Exchange and identifying how the corporate governance practices impact on a firm's financial performance. The study uses a sample of the twenty companies comprising the NSE-20 share index. The respondents in this study were compfUY secretaries and other officers who deal with governance and shareholder relations in the' respondent companies.
Data on financial performance for a period .of four years (from 2005' to 2008) was compiled from the company returns filed with the NSE. 'The study found that the firms surveyed had all companies ~?ad boards composed of eight to twelve directors. Independent directors comprised 25% to 50%' of the total directors. All boards have audit committees comprising independent directors. On disclosure and transparency, most respondents indicated that there is a room for improvement.
The results further indicated that most of the surveyed firms conduct a formal appraisal.of the CEO's performance and periodically review his performtIDce. Regarding performance, most of the surveyed firms posted strong performance with majority of the firms' profitability increasing by over 100% for a period of four years. The study recommends that regulatory mechanisms be strengthened so as to promote good corporate governance practices among listed firms | en_US |
