Relationship between corporate governance practices and Organizational performance of service state corporations in Kenya

Abstract

Corporate governance is a classification of laws and best regulations used by the corporations to achieve their mandate. It is believed to be one of the major determinants of organizational performance within the corporations including State Corporations in' _Kenya. Corporate governance therefore, has gained a lot of recognition as a tool for an efficient and effective board of directors. The purpose of the research was to determine a relation between corporate governance and organizational performance in service state corporations. The specific objectives of the study were; to establish the effect of board size, the effect of board composition and the effect of gender diversity in the board on organizational performance. The study targeted 675 top management employees of Service State Corporations in Kenya, a sample of 245 respondents were selected using Mugenda and Mugenda (2003) formula. Reliability was established using test-retest method and the result compared to the threshold value of 0.7. Validity was established through expert review. The findings revealed that the three corporate governance practices collectively accounted or 39.5% (R2= 0.395, p=O.OOO) variation in organizational performance in Service State Corporations in Kenya. It was further revealed that dimension of Board Size (B=0.270, p=O.OOO), Gender Diversity (8=0.210, p=O.O19) had significant positive influence on organizational performance of Service State Corporations. However, it was revealed that Board Composition (8= -0.027, p=0.806) had a negative influence on organizational performance of Service State Corporations in Kenya. The study concludes board size and gender diversity have positive influence on organizational performance of service state corporations in Kenya. However, board composition bears a negative influence on organizational performance of service state corporations in Kenya. Therefore, the study recommends that Policy should focus on corporate governance practices, the government should intervene on the composition of the board, address gender diversity in the board and this should be in line with the gender rule enshrined in the constitution of Kenya (2010). Further studies can be conducted to establish other determinants of organizational performance in Service State Corporation in Kenya . other than board size, board composition and gender diversity. The policy makers at the Service State Corporations may find the study key in acknowledging the extent of the industry reforms and use the findings to improve on the governance of this industry to avoid losses that have been experienced in the past and also currently.