THE EFFECT OF BOARDS CORPORATE GOVERNANCE ON THE FINANCIAL PERFORMANCE OF COMMERCIAL STATE CORPORATIONS IN KENYA

Duncan Ndegwa Kiragu

Abstract


Commercial State Corporations in Kenya have been experiencing a myriad of problems, including corruption, nepotism, gross financial mismanagement and a lack of good corporate governance structures. From the Public Investment Committee reports of 2011, out of 34 financial reports of Commercial State corporations examined by the Auditor General –Corporations, only 13 managed a clean bill of health from the Auditor and Controller General Report. The Government has subsequently put in place certain controls, such as requiring all Boards of state corporations to sign performance contracts with the government through their parent line ministries and for the chief executive officers to then sign performance contracts with their respective Boards, and the appointments of Audit committees among other measures. These processes have yet to be studied to see their effects on the overall financial performance of commercial state corporations in Kenya.In this context, this study attempts to provide empirical evidence on the connection between corporate governance and firm performance among state owned corporations in Kenya which is a developing country. The study seeks to answer the questions: What is the relationship between corporate governance and financial performance of commercial state corporations. The objectives that the study will seek to determine will be to establish the effect of the board size, board compositions, position of executive chairman, board remuneration and board operations on the financial performance of commercial state corporations. The study will be conducted through a survey questionnaire for collection of data. It will look into corporate governance practices and factors that lead into such practices and their impact on financial performance in selected number of commercial state corporations. The population of interest in this study will consist of all the state-owned commercial corporations in Kenya. There are 34 commercial state corporations as obtained from the Presidential Task Force on Parastatal Reforms Report (2013). The study proposes to investigate a total of 34 commercial state corporations.

Keywords: Corporate Governance, Financial Performance, Board Size, Board Composition, Board Chairman, Board Operations and Board Remuneration


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