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Effect of Corporate Governance on Financial Performance of Companies Listed in the Nairobi Stock Exchange: Case of Commercial and Services Firms in Kenya

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dc.contributor.author Njenga, Sylviah Margaret Nduta
dc.date.accessioned 2018-07-10T11:18:18Z
dc.date.available 2018-07-10T11:18:18Z
dc.date.issued 2018
dc.identifier.uri http://erepo.usiu.ac.ke/11732/3884
dc.description A Research Project Report Submitted to the Chandaria School of Business in partial fulfillment of the Requirement for the Degree of Master of Business Administration (MBA) en_US
dc.description.abstract The main objective was to determine the effect of corporate governance on financial performance of Nairobi Security Exchange (NSE) listed commercial and services firms. The specific objectives of the study included; to determine the effect of board size on financial performance of NSE listed commercial and services firms; to establish the influence of CEO duality on financial performance of NSE listed commercial and services firms; and to evaluate the effect of board composition on financial performance of NSE listed commercial and services firms. This study adopted a correlational research design. The study target population was the NSE listed commercial and services firms. The data was sourced from the listed firms’ published annual statements for the period 2012 to 2016. The data was both quantitative and qualitative secondary data. In analysing quantitative data, the study used descriptive statistics while qualitative data was analysed using content analysis. In addition, multiple regressions were used to determine the significance of each independent variable in affecting the financial performance of the said firms. From the study findings, financial performance as measured using ROA constantly significantly increased over the study period. The average board size increased as follows; from four to nine over the five-year period which was a transformation of the firms from small to large board sizes. The listed firms had large board sizes which were beneficial for their corporate performance because they have diverse expertise to help make better decisions, and are harder for their powerful CEOs to dominate. The trend of CEO duality among the twelve NSE listed commercial and services firms reduced over the five years. The reducing number of firms with CEO duality allowed for separation of power and functions between their chairmen of the board, a non-executive director and their CEOs their executive directors while it increased accountability. The number of non-executive directors was significantly higher than executive directors over the five-year period which ensured board independence in character, judgment and action in the management of the NSE listed commercial and services firms. The regression analysis established that board composition contributes most to the financial performance of NSE listed commercial and services firms followed by board size and CEO duality respectively. The study concludes that the three corporate governance practices (board size, CEO non-duality and board composition) adopted significantly influence financial performance of NSE listed commercial and services firms. The study recommends that the management of NSE listed commercial and services firms should constantly monitor the board size to ensure there is smooth coordination within the board, that there is no free riding by individual directors, its efficiency in decision making remains optimal and that CEO dominance is not allowed which are the challenges with large board sizes. The NSE listed commercial and services firms’ management should continuously review the roles of the CEO and the chairman to ensure both remain effective in their roles due to the ever-changing market dynamics and to safeguard shareholder value. NSE listed commercial and services firms should seek to ensure greater diversity of non-executive board members and continuous supervision of executive board members to reduce the risk of the company through rigorous checks and balances. en_US
dc.language.iso en en_US
dc.publisher United States International University - Africa en_US
dc.subject Corporate Governance en_US
dc.subject Financial Performance en_US
dc.subject Companies Listed in the Nairobi Stock Exchange en_US
dc.subject Commercial and Services Firms in Kenya en_US
dc.title Effect of Corporate Governance on Financial Performance of Companies Listed in the Nairobi Stock Exchange: Case of Commercial and Services Firms in Kenya en_US
dc.type Thesis en_US


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