Relationship between corporate governance practices and financial performance of commercial state corporations in Kenya
The reform of public enterprises has become an issue of top priority for developed as well developing countries, in the last fifteen years. A well defined and functioning corporate governance system helps a firm to attract investment, raise funds and strengthen the foundation for firm financial performance. Kenya many State Corporations have been characterized by monopolistic production, highly indigenized management and appointments of a large number of top managers based on political considerations.This has led to many of the State Corporations in Kenya to struggle to regain their foothold. The major objective of the study was to find out the relationship between corporate governance practices and performance in Commercial State Corporations in Kenya. The study adopted a survey design. The population of the study consisted of 27 commercial state corporations. The study used questionnaire to collect the primary data from the chief finance officers. The primary data collected through the questionnaire was analysed using descriptive statistics such as measures of central tendency which include mean, median and mode using SPSS version 17.5 and Microsoft excel. The study concludes that Good corporate governance approach aims at performing the main function of separating the firm's principals and agent and corporate governance themes in a corporation separates management from the board. The study concludes that board size and composition, Splitting of the roles of chairman and chief executive, optimal mix of inside and outside directions, proportion of outside directors, executive remuneration, number of non-executive directors, participation of outside directors and number board of directors affected the financial performance of the corporation. The study recommends that there should an increase meetings frequency if the situation requires a high quality supervision and control. The study also recommends that state owned enterprises should adopt good governance systems as they enhance the financial performance. The study therefore recommends that policy makers for state owned enterprises should take serious notice of these findings to implement policies that sustain the already existing strong corporate governance structures.