Corporate Governance and Performance of Community-Based Organizations in Nairobi City County in Kenya
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Date
2024
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journal of Economics and Finance (IAJEF)
Abstract
Community-Based Organizations (CBOs) in
Nairobi City County are facing poor financial
performance due to decreased donor
financing. The weak management systems
and mishandling of cash increase the severity
of the financial challenges in the CBOs. This
study examined the effect of corporate
governance on financial performances of
community-based organizations operating in
Kibera Sub County, Nairobi Kenya. The
primary aim of this study is to evaluate the
influence of corporate governance on the
financial performance of Community-Based
Organizations (CBOs). Specifically, it
investigates how the audit committee,
directors' compensation, and the quality of
external audits affect the financial outcomes
of these organizations. The research is
grounded in stakeholder theory, agency
theory, and stewardship theory. Employing a
descriptive research design, the study focused
on a population of 11 CBOs to achieve its
objectives. A census sampling technique was
applied to select these organizations operating
in Kibera Sub-County, Nairobi, Kenya. Data
was collected from secondary sources by
analyzing the financial statements and audit
reports of the CBOs. Descriptive statistics and
correlation analysis were utilized to interpret
the data, while a balanced panel data model
was employed to describe the collected
information. Several diagnostic tests,
including those for autocorrelation,
multicollinearity, normality,
heteroscedasticity, and the Hausman test,
were conducted. Ethical considerations such
as confidentiality and informed consent were
also prioritized in the study. The findings
indicated that managerial ownership has a
positive yet insignificant impact on the
financial performance of CBOs; directors'
remuneration similarly shows a positive but
insignificant effect. Conversely, the board
structure demonstrated a positive and
significant influence on the financial
performance of CBOs in Kibera. The audit
committee was found to have a positive but
insignificant effect, while the quality of
external audits significantly and positively
impacted the financial performance of these
organizations. The research recommends that
policymakers should focus on strengthening
the governance framework related to board
structure. This can be achieved by
establishing clear guidelines that promote
optimal board size and composition, ensuring
a balance between executive and nonexecutive members, and fostering diversity in
skills and experience
Description
Research article
Keywords
Citation
Momanyi, V. M., Gatauwa, J. M. (2024). Corporate governance and performance of community-based organizations in Nairobi City County in Kenya. International Academic Journal of Economics and Finance, 4(3), 391-409