Corporate Governance and Financial Performance of Quasi-Government Organizations in Kenya
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Date
2023
Authors
Obegi, Erick
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
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.
Description
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.
Keywords
Corporate Governance, Financial Performance, Quasi-Government Organizations, Kenya