Corporate Governance and Financial Performance of Quasi-Government Organizations in Kenya

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Obegi, Erick
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Kenyatta University
In Kenya, Quasi government organizations (QGOs) have faced serious challenges regarding their financial performance. Among the reasons for the decrease in financial performance involve corporate governance issues. This has gained a lot of focus in the recent past because of a series of firms being declared bankrupt. There has also been witnessed a poor financial performance by quasi-government-owned organizations. Poor corporate governance is responsible for firm failure in Kenya. Whereas every firm is desirous to enhance its FP, Corporate Governance, and FP is a vital matter that requires to be further investigated. Though QGOs remain integral to the economic growth of Kenya, their FP has been quite erratic and on the decline in the past decade. The research sought to establish the CG effect on the FP of quasi-government organizations in Kenya. Specifically, the research endeavored to evaluate the effect of structure of the board, remuneration, and board independence on the FP of QGOs in Kenya. In addition, the study endeavored to establish firm size moderating influence on the CG and FP relationship of QGOs in Kenya. The research embraced the positivism research philosophy. The study utilized the causal research design. The entire 187 QGOs were utilized as the study population. The study sample size was 65 quasi-government organizations in Kenya. Furthermore, Panel data analysis was undertaken. The research utilized secondary data for a 10 year period, from 2010 to 2020. Board structure has a significant effect on FP. Equally, Board remuneration has an effect that is a significant influence on the FP of QGOs. Transparency has a significant effect on FP whereas ndependence of the board had significant influence on FP. Size of the firm had to have a significant effect on corporate governance and the FP connection of quasi-government organizations in Kenya. The research found that board structure, board remuneration, transparency, and board independence explained a 40.32 percent variation in the FP of the quasi-government organization in Kenya. The research recommended that the management should adhere to laid down regulations on transparency, should adequately compensate its board members as good compensation motivates them to work towards enhancing the entities' FP, Kenyan quasi-organizations should ensure that most of the members among the boards are independent and non-executive to check the actions of the management and reduce agency conflicts. Quasi-organizations should ensure that the structure of the board is optimal and that it contains a sufficient number of members, as this will ensure that the quorum needed is available to the board. Lastly, the study recommended that firm managers in quasi-government organizations should seek to enhance their firm size since it has a positive significant moderating effect on FP.
A Research Thesis Submitted to the School of Business in Partial Fulfillment of the Requirements for the Award of Degree of Master of Science in Finance of Kenyatta University, June 2023.
Corporate Governance, Financial Performance, Quasi-Government Organizations, Kenya