Effect of Corporate Governance Structures on Organizational Performance of State Corporations in Education Sector in Kenya

Abstract

Corporate governance structures are the systems and regulations created within an organization, to help guide the decision-making processes. This help in determining the respective roles to be played by various stakeholders in the organization. Corporate governance has been shown to have an impact on the performance of state corporations. However, most of these studies concentrate on the board structures and how they affect the financial performance of the organization in respect to Return on Equity, Return on Assets and Tobin’s Q. This research 4.2 Corporations in the education sector in Kenya. This area is least studied especially being a service-oriented and largely non-commercial sector. The objectives of the study are to establish the influence of CEOs attributes on performance, examine the influence of board structure on performance and find out the impact of the audit committee on performance of state corporations in Kenya. The study targets 171 respondents across 27 sampled state corporations under the education sector in Kenya. The respondents are drawn from senior and middle level managers, finance and account officers and internal audit staff. The 27 state corporations were selected using a stratified random sampling technique from the target population of 45 state corporations. The data was collected for the three objectives with specific questions on Board diversity, attributes of the CEO, Independence of the Audit Committee. The data collection tool used a close-ended questionnaire, there were 134 questionnaires returned out of the targeted 162, through a drop and pick method. The data collected was cleaned, coded and posted to SPSS Ver 23 for analysis. A regression model was applied to analyze the existing relationship between the variables; independent variables: CEO Attributes, Board Diversity and Audit Committee effect on the organizational performance being the dependent variable. Diagnostic tests were conducted to check for normality and multicollinearity. The study found that CEOs attributes, Board of directors’ diversity and audit committee had significant effect at α = 0.05 and contribute 27.7% of variations of performance in state corporations in education sector in Kenya. The study therefore recommends that, for enhanced performance of state corporations in the education sector in Kenya, stakeholders should appoint CEOs with rich experience, boards with diversity including gender and audit committee members who have higher qualifications especially, professional qualifications.