The effect of corporate governance practices on/the financial performance of telecommunication firms in Somalia

Abstract

Corporate governance has attracted much attention, the world over, both in academic literature and popular press, especially after the failure of some of well-known and respected corporations in the world like Enron case. The objective of the study was to determine the effect of corporate governance practices on the financial performance of telecommunication firms in Somalia. The data obtained was analyzed using frequencies and regression analysis. The study was descriptive targeting all the four telecommunication companies in Mogadishu Somalia. Primary data that was collected through administration of a structured questionnaire measuring such variables as corporate governance index as indicated by size of the company, CEO duality, board composition and number of the board meetings, and financial performance measured by return on assets. Descriptive and inferential statistical analyses were conducted. Multi regression model was used to find the linear relationship between the corporate governance practices and financial performance of telecommunication companies in Somalia.Regression results reveal that there is a positive relationship between dependent variable (Financial performance) and independent variables (number of the board meetings, board composition, size of the firm) and a negative relationship between the financial performance and CEO duality and leverage of the firm. The study recommends that there is need for the government and other partners to formulate a clear standards for corporate governance practices, for setting rules of corporate transparency and disclosure so that it is protected the investor rights specially outsider investors, there is also need for gender balance consideration policy in board members