THE ROLE OF CORPORATE GOVERNANCE PRACTICES ON FIRM PERFORMANCE OF MEDIUM SIZED ENTERPRISES IN KILIFI COUNTY, KENYA

Abstract

The main purpose of this study was to investigate the role of corporate governance practices on firm performance of MSEs in Kilifi County, Kenya. Specifically, this study sought to establish the role of board size, board composition, board skills level and CEO duality on firm performance of MSEs in Kilifi County, Kenya.This study was conducted through a descriptive research design as it aimed at determining the what, when and how of a phenomenon to give facts of a situation from target respondents. Due to the variability of characteristics among items in the population, the researcher applied scientific sample designs by Cochran (1963)to select a sample of 385 respondents. The researcher used primary data collection through a semi-structured questionnaire. To achieve the objectives of the study the researcher used both descriptive and inferential statistics to analyse data and to describe the basic features of the data in the study as well as generalize the findings to the larger population. The study found thatboard size had a significance on firm performance of MSEs in Kilifi County, Kenya.The study also revealed that board composition made the structure function to maintain corporate integrity, reputation and responsibility.For board skills levels, it was found that a proper management structure was in place and the board members had sound knowledge of financial management and were always alert to ensure that the transactions in the firm were carried out with accuracy and honesty. The study further found that CEO duality properly indicated the separation of roles and had an increase in overall control. From the findings, the study made a number of concrete conclusions as stated below. It was concluded that small boards play ahigher signficant role in the performance of the respondents organization compared to large boards in terms of decision making, monitoring of expenses and communication to the organization and raising the value of the firm. Second, a board that was in charge of the operations of the MSE as well as one that had more outside directors led to better perfomance through the identification and protection of the rights of internal and external stakeholders, in addition to proper monitoring of the management. Third, board skills of monitoring and evaluation played a more signficant role in enhancing firm performance by looking into the strategies and policies of management. Finally,CEO duality as a corporate governance practice enhanced firm performance through thorough reviews by the CEOs of the organizations