The effect of corporate governance practices on financial performance of small-holder tea companies

Abstract

The study sought and analyzed the effect of corporate governance practices on financial performance of small-holder tea factory companies is attributed to 60% of the Kenyan tea hence a major contributor to the economic mainstay. Corporate stewardship is believed to contribute to performance and more so financial performance. This study was therefore guided by the following specific objective: To determine the effect of corporate governance practices on financial performance of small-holder tea factory Companies. Descriptive survey design was used to structure the research and by administering a structured questionnaire on the persons in charge of finance to the 27 randomly sampled respondents of the 54 small-holder tea factory companies in Kenya as at 31st December 2012, which formed the study population. From the sample of 27, 20 responded a response rate 74% of the sample size and 37% of the entire population. The response rate of 37% is considered adequate and is deemed representative of the study population of 54 factory companies. Data collected was analyzed to determine the correlation between corporate governance and financial performance. Regression analysis model was used to evaluate various variables in respect of components of Board composition that reflected varying results. These are; Age of board members reflected negative r=-0.217, education level positive r=0.227, gender diversity positive r=0.173 and experience r=0.000 in correlation coefficients. From the analysis the overall model found a positive correlation although low in significance between corporate governance and financial performance. The study recommends that corporate governance is important and impacts financial performance.