EFFECT OF CORPORATE GOVERNANCE ON FINANCIAL PERFORMANCE OF ENERGY SECTOR STATE CORPORATIONS IN KENYA

Abstract

This study aimedtoexamine theeffect of corporate governance on financial performance of Energy sector state corporations in Kenya. Specifically, the study sought to examine the role of internal controls, stakeholder management, organizational culture and leadership on the financial performance of Energy sector state corporations in Kenya. Since the study sought to obtain its data from senior management team in charge of the various activities and departments in energy sector state corporations, the researcher expected the respondents to be too busy in their daily duties which could have prolonged data collection exercise this limited the study. The study was guided by agency theory, stakeholder’s theory and resource based theory. The target population for the study was a total of 154 senior management staff in the finance offices of the Kenya Power, Geothermal Development Company, and KenGen. This study used acensus to select respondents for this study. Data was obtained using structured questionnaires. To ascertain whether the research instrument was valid, the study used Content Validity Index based on responses given by five content experts in the subject matter who comprised of the research supervisor and four managers in theEnergy sector state corporations. This study used Cronbach Alpha test of internal consistency to test the reliability of the research instrument based on pilot data. The pilot study was carried out among 15 (10% of sample size) senior management personnel from Nairobi County. After obtaining the study questionnaires from the field, the researcher checked the completeness of the questionnaires after which the questionnaires were coded into Statistical Package for Social Sciences for analysis. This study used both the descriptive and inferential statistics to analyse the data. Tables were used to present the study findings. The study found that internal controls, stakeholder management, organizational culture, and leadership accounts for 78.6% of the variability of financial performance of energy sector state corporations in Kenya. The study also found that internal controls, stakeholder management, organizational culture, and leadership have statistically significant influence on the financial performance of energy sector state corporations in Kenya. The internal controls were found to have greater influence on financial performance of energy sector state corporations followed by stakeholder management, organizational culture, and leadership. The study recommended that the energy sector state corporations ensure that there is there are adequate internal controls and that the frequency of internal audit be increased for effective monitoring of accounting and auditing operations. The energy sector state corporations should invest in updated systems for risk management and safeguarding of assets for protection against losses and depreciation of assets. Trainings to assist stakeholders identify their roles and responsibilities, to empower them towards their role in project sustainability should be conducted.