The Relationship Between Corporate Governance and Financial Performance Among Broadcasting Stations in Kenya

Abstract

Corporate governance has received much attention in the accounting literature, with studies focusing on the impact of corporate governance and the financial performance of the firm. The association between quality of corporate governance and firms' profitability is quite major focus in corporate governance studies, but one cannot predict much on the direction as prior literatures show mixed results. Better-governed firms might have more efficient operations, resulting in a higher expected future cash-flow stream. The purpose of this study is to determine corporate governance practices and the effect of corporate governance on financial performance of broadcasting station in Kenya. For the purposes of this study, the researcher will apply a descriptive research design. Primary data was collected from one head of the various departments in the thirty five broadcasting stations in Kenya. Self-administered drop and pick questionnaires will be distributed among thirty sampled employees currently employed by broadcasting companies in Kenya. Quantitative data collected was analyzed by the use of descriptive statistics. From the findings the study concludes that Limited partnership agreements at the top level that prohibit headquarters from cross-subsidizing one division with the cash from another, Highequity ownership on the part of managers and board members; board members who in their funds directly represent a large fraction of the equity owners of each subsidiary company. The study concludes that board size and composition, splitting of the roles of chairman and chief executive, optimal mix of inside and outside directions and number board of directors affected the financial performance of the companies. The board should balance the costs and benefits of meetings frequency given that the study established that if the board increases the frequency of its meetings, the recovery from poor performance is faster. The study also recommends that media houses should adopt good governance systems as they enhance the financial performance these media house. The study therefore recommends that policy makers for media houses should take serious notice of these findings to implement policies that sustain the already existing strong corporate governance structures.