The Effect of Corporate Governance on the Performance of State Corporations in Kenya
Abstract
Corporate governance is a concept that involves practices that entail the organization of
management and control of companies. It reflects the interaction among those persons and
groups, which provide resources to the company and contribute to its performance such as
shareholders, employees, creditors, long -term suppliers and subcontractors. It has been generally
agreeable from many studies in the recent past that companies that have corporate governance
systems in place also exhibit good performance. Thus corporate governance is increasingly being
recognized as an important aspect of an efficient and effective board of directors, enhancing
investment performance. This study sought to examine how Corporate Governance affects
performance of state Corporations in Kenya. Well-governed firms have higher firm performance.
Mismanagement, bureaucracy, wastage, incompetence and irresponsibility by directors and
employees are the main problems that have made State corporations (SCs) fail to achieve their
performance. The poor performance of SCs in Kenya by 1990 led to outflow from central
government to parastatals equivalent to 1 percent of the GDP in 1991. The objective of the study
was to identify the relationship between performance, corporate governance and size of state
corporations. The study used descriptive survey design. The target population for this study was
178 SCs in Kenya as presented by the report on Evaluation of the Performance of Public
Agencies for the financial year 2010/2011 published in March, 2012 by Performance Contracting
Department - Office of the former Prime Minister. Sample of 60 state corporations out of 178
was found ideal. Respondents were senior managers at these state corporations. Data were
analyzed through descriptive statistics and multilinear regression technique. The findings were
that the organizations that scored highly in corporate governance were also ranked highly in
yearly ranking of state corporations performance by the performance contracting department at
the current ministry of devolution. The empirical findings of this study are consistent with the
guidance developed by capital Market Authority that companies should endeavor to attain the
highest possible level of corporate governance. The study therefore recommends that financial
monitoring should be done thoroughly by the board and that State corporations should consider
adopting conduct of regular Corporate Governance Audits and Evaluations.
Publisher
University of Nairobi
Description
Masters