dc.description.abstract | This research project studied the relationship between the turnovers of Chief Executive Officers
and firm performance for firms listed in the Nairobi Securities Exchange under the
manufacturing and construction and allied sectors for the period 2010 – 2015. CEO turnover can
be used a corporate governance tool to control top management behaviour. However, CEO
turnover is influenced by the capital structure of an entity, board independence, ownership
composition and other factors. Sometimes, CEO turnovers are caused by factors beyond the
control of the CEO which has led to inconsistent results in previous researches on the impacts of
CEO turnovers on firm performance.
The research design used for this study was a descriptive cross-sectional research framework.
The population for this study is 15 companies and the research was a census of all the
organizations. Secondary data which was obtained from company financial statements was used
for the study. Return on assets was used to measure performance, CEO turnover was the
independent variable and firm leverage the controlling variable. The study used the SPSS
software version 20 to analyse the data and a multiple linear regression model was also used to
determine the relationships between the turnover of CEOs and firm performance. A
multicollinearity diagnostic test and tests for normality were conducted on the variables. The
tests indicated that there was no multicollinearity as both ROA and CEO turnover had a VIF of
1.009 which is less than 10.
The study findings revealed a weak and negative relationship between the turnover of a CEO and
the performance of the firm with a factor of -0.013. Leverage as a controlling variable also
influenced performance negatively with a factor of -0.170. The relationship between the turnover
of CEOs and company performance was found to be weak with a correlation coefficient of 0.318
(R=.318) and the variables explain changes in ROA by only 9.2% (adjusted R2 =0.092). The
result findings showed that the impact of CEO turnover on the performance of a business,
although negative, is weak and therefore recommended that proper CEO selection criteria should
be used to ensure that firms appoint CEOs who are best suited to solve the challenges of the
organization and to steer it into growth. More measures should therefore be undertaken to ensure
that CEOs are motivated to design appropriate strategies of improving the performances of the
manufacturing firms. | en_US |