| Peer-Reviewed

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

Received: 12 May 2017     Accepted: 20 May 2017     Published: 19 June 2017
Views:       Downloads:
Abstract

Decision making failures in Kenyan Parastatal Boardrooms has more to do with independence of mind and competences as well as behaviors of directors sitting around the boardroom tables. This includes how they work together, their degree of transparency and accountability as decision-making groups and the team production culture in task performance. This study seeks to explore the influence of corporate governance on organizational performance of state corporations in Kenya. A survey design was used to arrive at the expected outcomes in this study. Out of a population of 187 State Corporation, a sample size of 125 was considered with 375 respondents. Data was collected using questionnaires. Descriptive and inferential statistics were computed using statistical package of social sciences. Linear regression model was used to determine the relationship between corporate governance and organizational performance. The study revealed that the Board Strategic Involvement, board CEO-Chair Collaboration and Board Members knowledge & skills respectively are statistically significant (P-value=0.000). This implies that the three variables together influence organization performance of state corporations and account for 68% variation on performance. Board Leadership and Board Team production Culture (together) were not statistically significant at 5% level.

Published in Science Journal of Business and Management (Volume 5, Issue 4)
DOI 10.11648/j.sjbm.20170504.12
Page(s) 136-148
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2017. Published by Science Publishing Group

Keywords

State Corporation, Organization Performance, Board, Customer Satisfaction, Corporate Governance

References
[1] Anderson, R. C. and Reeb, D. M. (2004), Board composition balancing family influence in S and P 500 firms. 209/ Administrative science quarterly, 49 (2004): 209-237.
[2] Balakrishnan, S. (1996), Benefits of customer and competitive orientations in industrial markets. Industrial Marketing Management, 25 (7), 257-269.
[3] Barnhart, S. W. and Rosenstein, S. (1998), Board composition, managerial ownership and firm performance: An empirical analysis. The financial review 33: 1-16.
[4] Baron, R. M., & Kenny, D. A. (1986), The moderator-mediator variable distinction in social psychological research: Conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, 51, 1173-82.
[5] Baysinger, B. D. and Butler, H. N. (1995), corporate governance and the board of directors: Performance effects of changes in board composition Journal of Law, Economics and Organization, 1, 101-124.
[6] Baysinger, B. D. and Hoskisson, R. E. (1990), the composition of boards of directors and strategic control effects on corporate strategy, Academy of management review 15 (1): 72-87.
[7] Bonn, I. and Fisher, J. (2005), corporate governance and business ethics: Insights from the strategic planning experience. Corporate governance volume 13.
[8] Bosch, H. (1995). Corporate practices and conduct. Melbourne: FT Pitman.
[9] Business round table (2005). Principles of corporate governance, a white paper by, www.businessroundtable.org/, January, 8, 2007.
[10] Byrd, J. W. and Hickman, K. A. (1992). Do outside directors monitor managers? Evidence from tender offer bids. Journal of financial economics 32: 195-221.
[11] Chaganti, R. S., Mahajan, V. and Sharma, S. (1985), Corporate board size, composition and corporate failures in retailing industry. Journal of management studies 22: 400-417.
[12] Chiang, H. (2005), an empirical study of corporate governance and corporate performance. The journal of American academy of business, Cambridge 95-110.
[13] Chung, K. H. and Pruitt, S. W. (1994), a simple approximation of Tobin’s Q, Financial management, 23 (3), 70-74.
[14] Clark, W. and Demirag, I. (2002), Enron: The failure of corporate governance, Greenleaf Publishing.
[15] Cooper, D. R., & Schindler, P. S. (2003). Business Research Methods (8th ed.). New Delhi: Tata McGraw-Hill Publishing Limited.
[16] Cotter, J. F., Shivdasani, A. and Zenner, M. (1997), Do independent directors enhance target shareholder wealth during tender offer? Journal of financial economics 43: 195-218.
[17] Daily, C. M. and Dalton, D. R. (1993), Board of directors leadership and structure: Control and performance implications, Entrepreneurship: Theory and practice, 7, 65-82.
[18] Daily, C. M. and Dalton, D. R. (1994), Bankruptcy and corporate governance: The impact of board composition and structure, Academy management Journal 37: 1603-1617.
[19] Dalton, D. R., Daily, C. M., Ellstrand, A. E. and Johnson, J. L. (1999), Number of directors and financial performance: A meta-analysis, A\academy of management Journal 42 (6): 674-686.
[20] Davidson, W. N., Pilger, T and Szakmary, A. (1998), Golden parachutes, board and committee composition and shareholder wealth, The financial review 33: 17-32.
[21] Davis, J., Donaldson, L. and Schoorman, D. (1997), toward a stewardship theory of management, Academy of management review 1997, Vol. 22 No. 1, 20-47.
[22] Dicke, L. A. And Ott, S. (2002), A test: Can stewardship theory serve as a second conceptual foundation for accountability methods in contracted human services? International Journal of public administration, 25 (4), 463-487.
[23] Donaldson, L. & Davis, j, (1991). Stewardship Theory or Agency Theory; CEO Governance and Shareholder Returns. Academy of Management Review, Vol 20, No. 1 pp 65.
[24] Donaldson, L. and Davis, J. H. (1991), Stewardship theory or agency theory: CEO governance and shareholder returns, Australian Journal of management. 16 (1), pp 49-64.
[25] Eisenberg, T., Sundgren, S, and Wells, M. T. (1998), larger board size and decreasing firm value in small firms, Journal of financial economics 48: 35-54.
[26] Finkelstein, S. and Aveni, R. A. (1994), CEO duality is double edged sword: How boards of directors balance entrenchment avoidance and unity command, Academy of management Journal 37, 1079-1108.
[27] Fisher, A. A., Laing, J., & Stoeckel, J. (1985). Guidelines for Overcoming Design Problems in Family Planning Operations Research. Studies in Family Planning, 16 (2).
[28] Forbes, D. P. and Milliken, F. (1999), Cognition and corporate governance: Understanding board of directors as strategic decision-making groups, Academy of management review, 3, 489-505.
[29] Gathura, A. N., (2007). Corporate governance structure and performance of manufacturing Firms.
[30] Gatignon, H., & Xuereb, J. M. (1997), Strategic orientation of the firm and new product performance. Journal of Marketing Research, 34 (1), 77-90.
[31] Gitari J. M. (2008). Corporate governance and the financial performance of state corporations: the case of new Kenya cooperative creameries. Unpublished MBA project University of Nairobi.
[32] Gladstein, D. (1984), a model of task group effectiveness, Administrative science quarterly, 29: 499-517.
[33] Golden, B. R. and Zajac, E. J. (2001), when will boards influence strategy? Inclination x power = strategic change, Strategic management Journal 22: 1087-1111.
[34] Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (1998). Multivariate Data Analysis with Readings (5th ed.). Englewood Cliffs, NJ: Prentice Hall.
[35] Harvill, L. M. (1991), An NCME instructional module on standard error of Measurement. ITEMS, (Summer), 33-41.
[36] Holderness, C. G and Sheehan, D. P. (1998), the role of majority shareholders in publicly held corporations. Journal of financial economics 20: 317-346.
[37] Javalgi, R. G., Whipple, T. W., & Ghosh, A. K. (2005), Market orientation, strategic flexibility, and performance: Implications for services providers. Journal of Services Marketing, 19 (4), 212-221.
[38] Jensen M (2001) Value Maximization, stakeholder Theory and the Corporate Objective Function. European Financial Management 7, 297-317.
[39] Jensen, M and Meckling. W (1976). Theory of the firm: Managerial Behavior, Agency Costs, and Ownership Structure. Journal of Management, Vol. 22 No 3, pp. 409-438.
[40] Jensen, M. C. and Meckling, W. H. (1976), Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3, 305-360.
[41] Kang, J. K. and Shivdasani, A. (1995), Firm performance, corporate governance and top executive turnover in Japan. Journal of financial economics 38: 29-58.
[42] Kiel, G. and Nicholson, G. (2003), Board composition and corporate performance: How the Australian experience informs contrasting. Corporate governance Volume 11 No. 3.
[43] Klein, A. (1998), Firm performance and board committee structure. Journal of law and economics: 41 (1): 275-303.
[44] Kothari, C. R. (2003). Research Methodology: Methods and Techniques. New Delhi New Age Int. Publishers.
[45] Lorsch, J. W. and Zelleke, A. (2005), should the CEO be Chairman? MIT Sloan management review, Vol. 46 (2), 71-74.
[46] Malhotra, N. K., & Dash, S, (2011), Marketing Research an Applied Orientation. New Delhi: Pearson.
[47] Mugenda, M. O. & Mugenda (2003). Research Methods: Qualitative and Quantitative Approaches, Acts Press, Nairobi.
[48] Owen, L. (2002). Introduction to Survey Research Design. SRL Fall 2002 Seminar Series: http://www.srl.uic.edu
[49] Private sector initiative report (1998). Principles of corporate governance in Kenya and a sample code of best practice. Kenya Private sector corporate governance trust.
[50] Rechner P. L. & Dalton, D. R. (1991), CEO duality and Organizational performance; a longitudinal analysis. Strategic Management journal 12, 155-160.
[51] Slater, S. F., & Narver J. C. (1994b), Market orientation, customer value and superior performance. Business Horizon, 37 (2), 22-28.
[52] State Corporations Advisory Circular (2010). Office of the President, Government Printing Press, Nairobi.
[53] Sundarom, A. K, & Yamach, C. (1999). The Corporate Objective Revisited.
[54] Zikmund, W. G. (2003). Exploring Marketing Research (7th ed.). USA: Thomson, South Western.
Cite This Article
  • APA Style

    Jenifer W. Muriuki, Thomas Cheruiyot, Joyce Komen. (2017). Influence of Corporate Governance on Organizational Performance of State Corporations in Kenya. Science Journal of Business and Management, 5(4), 136-148. https://doi.org/10.11648/j.sjbm.20170504.12

    Copy | Download

    ACS Style

    Jenifer W. Muriuki; Thomas Cheruiyot; Joyce Komen. Influence of Corporate Governance on Organizational Performance of State Corporations in Kenya. Sci. J. Bus. Manag. 2017, 5(4), 136-148. doi: 10.11648/j.sjbm.20170504.12

    Copy | Download

    AMA Style

    Jenifer W. Muriuki, Thomas Cheruiyot, Joyce Komen. Influence of Corporate Governance on Organizational Performance of State Corporations in Kenya. Sci J Bus Manag. 2017;5(4):136-148. doi: 10.11648/j.sjbm.20170504.12

    Copy | Download

  • @article{10.11648/j.sjbm.20170504.12,
      author = {Jenifer W. Muriuki and Thomas Cheruiyot and Joyce Komen},
      title = {Influence of Corporate Governance on Organizational Performance of State Corporations in Kenya},
      journal = {Science Journal of Business and Management},
      volume = {5},
      number = {4},
      pages = {136-148},
      doi = {10.11648/j.sjbm.20170504.12},
      url = {https://doi.org/10.11648/j.sjbm.20170504.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjbm.20170504.12},
      abstract = {Decision making failures in Kenyan Parastatal Boardrooms has more to do with independence of mind and competences as well as behaviors of directors sitting around the boardroom tables. This includes how they work together, their degree of transparency and accountability as decision-making groups and the team production culture in task performance. This study seeks to explore the influence of corporate governance on organizational performance of state corporations in Kenya. A survey design was used to arrive at the expected outcomes in this study. Out of a population of 187 State Corporation, a sample size of 125 was considered with 375 respondents. Data was collected using questionnaires. Descriptive and inferential statistics were computed using statistical package of social sciences. Linear regression model was used to determine the relationship between corporate governance and organizational performance. The study revealed that the Board Strategic Involvement, board CEO-Chair Collaboration and Board Members knowledge & skills respectively are statistically significant (P-value=0.000). This implies that the three variables together influence organization performance of state corporations and account for 68% variation on performance. Board Leadership and Board Team production Culture (together) were not statistically significant at 5% level.},
     year = {2017}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Influence of Corporate Governance on Organizational Performance of State Corporations in Kenya
    AU  - Jenifer W. Muriuki
    AU  - Thomas Cheruiyot
    AU  - Joyce Komen
    Y1  - 2017/06/19
    PY  - 2017
    N1  - https://doi.org/10.11648/j.sjbm.20170504.12
    DO  - 10.11648/j.sjbm.20170504.12
    T2  - Science Journal of Business and Management
    JF  - Science Journal of Business and Management
    JO  - Science Journal of Business and Management
    SP  - 136
    EP  - 148
    PB  - Science Publishing Group
    SN  - 2331-0634
    UR  - https://doi.org/10.11648/j.sjbm.20170504.12
    AB  - Decision making failures in Kenyan Parastatal Boardrooms has more to do with independence of mind and competences as well as behaviors of directors sitting around the boardroom tables. This includes how they work together, their degree of transparency and accountability as decision-making groups and the team production culture in task performance. This study seeks to explore the influence of corporate governance on organizational performance of state corporations in Kenya. A survey design was used to arrive at the expected outcomes in this study. Out of a population of 187 State Corporation, a sample size of 125 was considered with 375 respondents. Data was collected using questionnaires. Descriptive and inferential statistics were computed using statistical package of social sciences. Linear regression model was used to determine the relationship between corporate governance and organizational performance. The study revealed that the Board Strategic Involvement, board CEO-Chair Collaboration and Board Members knowledge & skills respectively are statistically significant (P-value=0.000). This implies that the three variables together influence organization performance of state corporations and account for 68% variation on performance. Board Leadership and Board Team production Culture (together) were not statistically significant at 5% level.
    VL  - 5
    IS  - 4
    ER  - 

    Copy | Download

Author Information
  • School of Business, Moi University, Eldoret, Kenya

  • School of Business, Moi University, Eldoret, Kenya

  • School of Business, Moi University, Eldoret, Kenya

  • Sections