Corporate Governance and Implementation of Financial Management Practices in Financial Institutions of the Federal Government of Somalia

Abstract

Effective implementation of financial management practices by government institutions has important implications for delivery of service to citizens. However, some reports indicate the need for improvement of these practices in the Federal Government of Somalia though corporate governance can partly address this concern. The purpose of this study was to examine the relationship between corporate governance and implementation of financial management practices in financial Institutions of the Federal Government of Somalia. A descriptive quantitative survey of 112 respondents was conducted using self-report structured questionnaires. The results indicated that there was inadequate compliance with the four corporate governance principles, namely participation, accountability, transparency and equity, because the responses had a mean of three (M=3) on a scale of 1 to 5 where 1= strongly disagree and 5=strongly agree with statements of the practice of the principle. Further, there was insufficient implementation of financial management best-practices of planning, control, budgeting and resource allocation. It was also established that corporate governance practices had a significant influence on the implementation of financial management practices. Two of corporate governance principles, transparency and accountability, were found to be significant predictors of implementation of financial management practices. The influence of participation and equity principles of corporate governance were not significant at 5% level of significance (both p-values were greater than 0.05). These findings provide policy implications for the Federal Government of Somalia institutions for enhancing their corporate governance practices which would lead to improvement in the implementation of best-practice financial management practices