An Analysis of the Effect of Corporate Governance on Performance of Commercial State Corporation in Kenya

Alice Miring‟u and Esther Muoria.

Abstract

This study sought to examine how Corporate Governance affects performance in commercial state corporations in Kenya. Well-governed firms have higher firm performance. Mismanagement, bureaucracy, wastage, incompetence and irresponsibility by directors and employees are the main problems that have made State corporations (SCs) fail to achieve their performance. The poor performance of SCs in Kenya by 1990 led to outflow from central government to parastatals equivalent to
1 percent of the GDP in 1991. The objective of the study is to identify the relationship between financial performance, board composition and size. The study used descriptive survey design. The target population for this study was 41 commercial SCs in Kenya as presented by Inspectorate of SCs. Sample of 30 respondents out of 41 was found ideal. Respondents were 30 human resource officers. Data were analyzed through descriptive statistics and multilinear regression technique. The findings were that the board size mean for the sample was found to be ten while a minimum of three outside directors is required on the board. The study thus discloses that
there is a positive relationship between RoE and board size and board compositions of all SCs.

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