Examining the Effect of Ceo Turnover on Firm Performance of Selected Power Firms in East Africa

Abstract

The departure of a CEO is a momentous occasion that can greatly influence the path of a company. The power industry, renowned for its capital-intensive operations and strategic significance, is currently grappling with distinctive hurdles associated with leadership changes. Simultaneously, the ownership structure of these companies adds another layer of intricacy, given the coexistence of various ownership models such as government, private, and public within the sector. Despite the growing significance of CEO turnover and ownership structure in shaping investment decisions and financial performance, a comprehensive analysis specific to the Eastern Africa power sector is still missing. It is against this backdrop that this study arose to examine the effect of CEO turnover on firm performance of selected power firms in East Africa. Specifically, the research inquired whether CEO turnover affected board oversight, ownership structure, investment decisions, leverage, and size on firm performance of power firms in the region. The inquiry adopted a combination of descriptive and quantitative research designs. The target population embraced in this study entailed six (6) power firms operating in East Africa, which included Kenya Power, KENGEN, KETRACO, UMEME, TANESCO and Ethiopian Electric Utility. The study collected information from financial statements covering a period of 10 years from 2013-2022. The study employed a Statistical Packages for Social Sciences (SPSS Version 24.0) for data analysis. From the analysis of the findings and conclusion, it was established that CEO turnover affected performance of power firms in East Africa. Hence, it was recommended that to strategically strengthen the role of boards in overseeing key aspects of selected power firms, boards should be well structured and possess the necessary expertise and diversity to effectively guide the firms. Boards should actively participate in strategic decision-making processes, risk management, and financial planning to positively contribute to the overall financial performance of the companies; that the power companies to thoroughly assess and possibly improve their ownership structures; that these firms to prioritize strategic investment planning, considering the established strong positive correlation between investment decisions and financial performance; that the power firms to focus on optimal leverage management and assess their current leverage levels and ensure that they align with industry benchmarks and firm's overall financial strategy and finally that these firms to strategically focus on scaling their operations. These will involve careful resource allocation to accommodate growth while maintaining operational efficiency. Companies should assess their current size in relation to market opportunities and, if appropriate, consider expansion strategies that align with their financial goals. The study suggested a longitudinal investigation to be carried out in order to monitor the turnover of CEOs and the performance of companies over a prolonged duration over time and broaden the focus of this study by contrasting the effects of CEO turnover on company performance in other East African nations.