Effect Of Corporate Governance Practices On Performance Of Public Universities In Kenya

Abstract

Although the strategic management literature strongly acknowledges the existence of a relationship between corporate governance and overall organizational performance, some studies have found mixed results. The inconsistency of findings indicates the need for additional research into the ongoing debate about this relationship. As a result, the purpose of this research was to determine the impact of corporate governance on public universities performance in Kenya. Corporate governance plays an important role in the economy and that is why it has attracted a lot of interest in the recent past by various stakeholders as they are becoming increasingly aware of its influence in the socio-economic wellbeing of the organization and the society as a whole. There has been little consensus in terms of theoretical and empirical review on the relationship between two. The objective, therefore, was to establish the effect of corporate governance on the performance of public universities in Kenya. The study was guided by board diversity, board competence and finally the audit committee as the independent variables while the performance of public universities in Kenya as the dependent variable. This study was anchored on three theories which formed the basis of this research. They include, stewardship theory, Fiduciary political theory and stakeholder‟s theory. The research was conducted using descriptive research design. The population of interest for the study was the 26 public universities in Kenya. The respondents were 2 council members in each university giving a total of 52 respondents. Structured questionnaires were used to collect primary data for the study. The primary data was gathered from university council members in public universities in Kenya. Data analysis was done using SPSS version 20 and descriptive and regression analyses were undertaken accordingly. The research discovered a significant positive association between board competence, board diversity and audit committee with organization performance of public universities in Kenya. Its regression analysis found that the collective usage of corporate governance was responsible for 84.3 percent of the variations in performance of these institutions. Corporate governance mechanisms are critical for organizations to adopt in their efforts to increase their performance levels, according to the result of this research. Based on the findings, board diversity had the largest impact on performance followed by audit committee while board competence had the least influence on performance of public universities in Kenya. It is therefore, recommended that board council members and policy makers of the public universities that are yet to adopt effective corporate governance mechanisms should adopt them to remain competitive in this turbulent business environment. It is also suggested that public universities policy makers develop sound policies to guide them when pursuing corporate governance.