Relationship between corporate governance practices and financial performance of regulatory state corporations in Kenya

Abstract

The aim of this research was to determine the relationship between corporate governance practices and financial performance in regulatory state corporations in Kenya. The corporate governance practices included board of directors‟ composition and size, independence of board committees, role of internal audit function, frequency of board meetings, CEO duality and board diversity. The researcher used a descriptive correlation research design to determine the relationship between corporate governance practices and financial performance. The sample comprised of 18 regulatory state corporations in Kenya. The data set comprised of both secondary and primary data. Primary data on corporate governance practices was collected through questionnaires while Secondary data was obtained from the financial reports filled at the auditor general‟s office. A multiple regression model of financial performance and corporate governance practices characteristics was applied to examine the relationship between the variables. The study established that financial performance of regulatory state corporations in Kenya is influenced by corporate governance practices. The findings concur with previous evidence from empirical studies on corporate governance, indicating that adoption of the various corporate governance practices by regulatory state corporations plays a part in the improvement of their financial performance.