Effect Of Corporate Governance Practices On Performance Of State Corporations In The Tourism Industry In Kenya

Abstract

The main objective of the study was to assess the effect of Corporate Governance practices on performance of State Corporations in the tourism industry in Kenya. It focused on three key areas of the organization governance viz., Board diversity; CEO attributes and audit committee activities as independent variables whereas performance was the dependent variable. Six State Corporations with headquarters in Nairobi formed the target population. The subjects of study were 57 management staff of the six selected SCs, which were chosen based on Census survey since the number was small and manageable. This group was deemed to have needed information that was sought by the researcher since it is involved in planning and executing of organization policies. The management staff also formed the unit of analysis. The study adopted descriptive design and primary data was collected using the questionnaire that was made up of structured, and closed ended questions based on the five point Likert scale where 1 was the lowest (strongly disagree) and 5 being the highest as strongly agree. Before use, the questionnaire was validated through a pilot test on five employees in one of the organizations (KUC) who were not part of the study. The questionnaire was also subjected to Cronbach’s test for reliability. The collection of data involved drop and pick method by the researcher and they were collected after three weeks. After collection, data was cleaned, coded and analyzed with the help of Excel and Stata version 13 software. The analysis was based on descriptive and multiple regression techniques. After the analysis, data was presented in form of charts, tables, percentages and frequencies. The study found out that board diversity, CEO attributes and audit committee activities positively and significantly affected performance in the state corporations in the tourism industry in Kenya,( R- Squared= 53.1%, p<0.05). That signified that 53.1 % of variance in performance was explained by corporate governance practices while 46.9% was attributed to other factors. Further, the study established that individually, board diversity had the highest effect on performance, correlation coefficient (49.4% against audit committee, which posted a coefficient of 32.5%. Therefore, the study rejected the null hypothesis for both board diversity, audit committee, and recommended that the government expedite on diversity in public institutions and empower audit committees for better performance.