Corporate Governance as a Strategic Tool to Improve Performance of Listed Companies in Kenya
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Date
2015Author
Ndung’u, Jeremiah K
Type
ThesisLanguage
enMetadata
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Corporate challenges such as fraud, declining performance and collapse have impelled
the opinion that the practice of good governance is the ultimate solution to firms. It is for
this reason that the concept of corporate governance has gained a lot of popularity over
the last decade. Increasingly, organizations are now focusing on corporate governance as
just not mere meeting statutory obligations, but as an imperative business strategic tool to
improve their performance, attain sustainable growth and long-term competitive
advantage. Most of the studies done on the value of corporate governance have been
conducted in the developed world. This study therefore aimed at contributing to the
knowledge of this subject matter but specifically in regard to the listed companies in
Kenya. The study objectives were to: determine the extent to which listed companies in
Kenya have integrated corporate governance guidelines into their corporate strategies;
and to determine the effectiveness of corporate governance as a strategic tool to improve
performance of listed companies in Kenya. To meet these study objectives, a descriptive
census survey was used. The study population comprised of 63 companies which were
listed at Nairobi Securities Exchange as at December 31, 2014. Questionnaires were used
to collect primary data and were sent to at least one person who was either a shareholder,
director, senior manager or company secretary of each of the targeted companies. 39
questionnaires were completed and returned, representing a response rate of 62%.
Secondary data used was mostly from the published audited financial statements. Data
collected was analyzed and findings presented in form of graphs, pie charts and tables. It
was observed that most of the companies listed at the Nairobi Securities Exchange were
implementing corporate governance guidelines issued by the Capital Markets Authority.
In addition, most of the companies had incorporated corporate governance practices into
their corporate strategies resulting to improved performance. The study therefore found
that corporate governance was an effective strategic tool to improve performance of listed
companies in Kenya. These research findings have made a contribution to the theory and
practice in regard to the value of corporate governance in general and specifically on the
use of corporate governance as a strategic tool to improve performance of listed
companies. Based on the results of the study, it is recommended that the Capital Markets
Authority should ensure strict compliance of corporate governance guidelines by the
listed companies in order to enhance productivity and therefore attract more investors
into the market. Similarly, listed companies should dedicate adequate resources to ensure
compliance with good governance practices for improved corporate performance. This
study recommends that further research be carried out targeting the small owner-managed
companies as well as other organizations in Kenya to enable generalization of findings.