CORPORATE GOVERNANCE PRACTICES AND FINANCIAL PERFORMANCE OF SELECTED SMALL AND MEDIUM ENTERPRISES IN KENYA

Abstract

This study aimed at investigating the effect of corporate governance practices on the financial performance of selected SMEs in Kenya. Subsequently the specific objectives steered this research project to determine the effects of board structure, CEO duality as well as audit committee on the financial performance of the selected SMEs in Kenya. The study adopted stakeholder theory, stewardship theory and resource dependency theory. The study looked at empirical review relevant to this research proposal. A descriptive research design was utilized. A target population of 165 directors and managers from the selected SMEs was the unit of analysis. The study targeted all the top level management of the selected SMEs in Kenya hence a census study was utilized to administer questionnaires to the respondent.  Secondary data was collected through the use of secondary data collection schedule. The questionnaire validity was tested using the supervisor and expert assessment and reliability was checked by use of Cronbach’s alpha. The collected data was probed for error then it was scrutinized using descriptive statistic by utilization of mean and standard deviation with the guidance of Statistical Package of Social Science (SPSS) software version 22 with and multiple regression analysis were used. A diagnostic test was conducted where a Shapiro Wilk test, Autocorrelation test and Multi-collinearity test was utilized. The collected data was analyzed and presented in form of charts, tables and graphs. Ethical considerations were observed. The study found that board structure had statistically insignificant effect on financial performance of SMEs. The study found that CEO duality had a positive and significant effect on financial performance of SMEs. The study found that audit committee had a positive and significant effect on financial performance. The study recommended that being a director on a board is a demanding job as a result of this duty, making the design of the function and make-up of the board of directors an essential task is critical.

Key Words: Corporate Governance, Board Structure, CEO Duality, Audit Committee

CITATION: Gitari, D. M., & Koori, J. (2023). Corporate governance practices and financial performance of selected small and medium enterprises in Kenya. The Strategic Journal of Business & Change Management, 10 (3), 46 – 60.