Effect of Corporate Governance on Organizational Performance of State Corporations in Kenya

Abstract

The objective of the study was to determine the effect of corporate governance on organizational performance of State Corporations in Kenya. The study population was 184 state corporations out of which 60 state corporations were selected for the study. The study used secondary data from published annual reports and financial statements for the year 2010-2014. The study used a regression model to analyze the relationship between organizational performance and corporate governance practices. Control variables namely firm size and age of the firm were used in the regression model. The study findings showed a positive relationship between corporate governance practices and organizational performance of state corporations in Kenya. The coefficient of correlation (R) shows a strong positive relationship between variables (0.895). As for the corporate governance variables, the most influential is board size with a regression coefficient of (0.366) while insider shareholding had the least impact on organizational performance with a regression coefficient of (0.018) and a p-value of (0.097). Among the control variables, firm size had a strong correlation (1.213) while age of the firm had a weak one (0.412). It can be concluded that corporate governance affects the organizational performance of state corporations in Kenya. Therefore corporate governance is necessary to achieve proper functioning of State Corporation and achieve its stated vision and mission if well implemented.