A dissertation submitted in partial fulfillment of the requirements for the award of MBA in Corporate Management in School of Business and Public Management at KCA University.
The objective of the study was to establish the effect of corporate governance structures on the financial performance of large manufacturing firms in Kenya. The structures also referred to as structures of corporate governance includes: independent directors, board size, board committees and CEO duality. Study was guided by the following specific objectives: Determine the effect of Independent Directors on a company’s financial performance, Determine the effect of board committees on a company financial performance, Determine the impact that a company’s board size has on its financial performance, Evaluate how the CEO’s dual role as a company’s chairman and a CEO affects the financial performance of the company. The research design to be used for this study was descriptive design. The target population of this study was the large manufacturing firms in Kenya which are members of Kenya Association of Manufacturers. The population of this study is therefore 108 large manufacturing firms. A sample size of 54 firms was taken. The study used both primary data and secondary data. Data was collected by use of questionnaire. The questionnaire contained likert scale. Data was analyzed mainly by use of descriptive and inferential statistics. Descriptive statistics included mean and standard deviation. Data was also presented by use of graphs, pie charts and tables. Regression analysis was also used to show the sensitivity of financial performance and ROA to various independent variables. Following the study findings it was possible to conclude that all the four variables the Independent variables had an effect on a company’s financial performance. This was supported by majority of the respondents who concluded that independent directors had a mandate to decision making in financial performance. The Independent directors monitor and control activities of executive board of directors to ensure compliance and reduction of opportunistic behaviours as well as safe guarding the assets of the firm. Board committees in the firm ensures that the executive board of directors’ decisions are based on current information derived from the board reports and are in the interest of the shareholders. Coordination and communication problems arising from overcrowded boards impede on company’s performance and causes shareholders to lose money in the company through allowances and inefficiencies. The post of the CEO should be fulltime and should have no duality Regression results indicated that there was a positive and significant relationship between independent directors, board committees, board size and CEO’s dual role as a company’s chairman on financial performance and financial performance of manufacturing firms. The study recommended that the firm should have non executive directors who should constitute at least one third of the board of directors. A company should have small boards so as to have more favorable performance, the appropriate board size should be 7 to 8 members and the post of the CEO/chairman should be full-time
