The Effect of Corporate Governance on Financial Management Efficiency of Constitutional Commissions in Kenya

Abstract

Corporate governance encompasses how an organization is managed; it’s corporate and other structures, its culture, its policies and strategies, and the ways in which it deals with its various stakeholders. The need for corporate governance arises because of the separation of management and ownership in the modern corporations. The motivation for this study was to examine whether the variables that researchers had found to be significant in explaining corporate governance practices in relation to financial management efficiency of companies in developed countries apply in a developing country like Kenya. The study’s objective was therefore to assess the effect corporate governance on financial management efficiency of constitutional commissions in Kenya. The study adopted a descriptive survey and relied on both primary and secondary data for 10 Constitutional Commissions for a period of three years from 2010/2011 to 2012/2013 financial years. Data on approved budget and expenditures for Constitutional Commission’s was compiled from data managed by the Office of the Controller of budgets. Data was the analysed using a regression model where financial management efficiency was the dependent variable and the independent variables being; Board Size, Board Roles and Board effectiveness. The Policy recommendations from this study would be to find out other factors affecting the financial management efficiency of constitutional commissions other than the Board size, Board roles and Board effectiveness that only explain on average 86% of the variations in financial management efficiency. It is also important that executive commissioners are reduced in the constitutional commissions as the basis for enhancing financial management efficiency. This can be best achieved through revising the terms of contract for incoming commissioners after completion of tenure for the commissioners in office.