EFFECT OF CORPORATE GOVERNANCE ON FINANCIAL PERFORMANCE OF STATE FUNDED ENTITIES IN KENYA

KABAI James Kamau, BAIMWERA Benard, WAITHAKA Matu

Abstract


Abstract: Corporate governance is generally described as simply the system by which companies or public bodies are: directed, and controlled. For any public entity not to collapse, they ought to comply with Corporate Governance principles including but not limited to: Appointments, Team composition, Control procedures and processes and Performance management and assessment. In Kenya these ideals are never implemented optimally. The main objective of the study was to analyze the effects of corporate governance on financial performance of state funded entities in Kenya. Specifically the study focused on the following elements of corporate governance: autonomy status, board effectiveness, government supervision and regulations overlap on performance of the state owned entities in Kenya. The study adopted descriptive cross-sectional design. The study targeted the board of directors, directors, senior managers, finance and accounts staff of Kenya Broadcasting Corporation, Kenya Electricity Generating Company, Kenya Pipeline Company, Kenya Railways Corporation, National Oil Corporation of Kenya and Kenya Broadcasting Corporation. The data generated by the study after fieldwork was edited, coded then entered into a computer for processing using the Statistical Package for Social Sciences (SPSS v.21.0). Descriptive and inferential statistics was used to analyze information generated from respondents. The data collected was presented by use of percentages, frequency distributions, tables, and the researcher categorized variables. The study concluded that, holding all the other factors constant, the financial performance in the state owned entities in Kenya was tested against key corporate governance elements measured by their significance and established that in deed the corporate governance elements (Autonomy Status (AS), Government Supervision (GS), Regulations Overlap (RO), and Board Effectiveness (BE)) contributed to 80.8% of the variation of financial performance in the state owned entities in Kenya as explained by adjusted R2 of 0.808.The study finally, recommended that, there is a need to streamline the overlapping regulations in order to give parastatals some autonomy, which would enable them to meet targets set under the performance contracts they have entered into with the government.

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