INFLUENCE OF CORPORATE GOVERNANCE ON ORGANIZATIONAL PERFORMANCE IN KENYA: A CASE OF AGRICULTURAL STATE CORPORATIONS

Abstract

Corporate governance is increasingly becoming important in organizations as an approach of improving organizational performance. Lack of sound corporate governance has led to poor performance of state corporations throughout the world as well as suppressing sound and sustainable economic decisions. Economic crisis that is being experienced in many developing countries are due to weak corporate governance in many state corporations. Despite tight regulatory framework, corporate governance continues to weaken in Kenya. The purpose of the study was to establish the influence of corporate governance on organizational performance in Kenya with a case of agricultural state corporations. The study is built on the stakeholder theory, resource independence theory, stewardship theory and agency theory. The study adopted a descriptive survey and a sample of 80 respondents was used for this study. The primary data was collected by use of questionnaires. The secondary data was obtained from published documents. A pilot study was conducted to pre-test the validity and reliability of instruments for data collection. The data was analyzed with the help of SPSS version 21 and Excel. The study adopted correlation and regression analysis at 5% level of significance to determine strength and direction of the relationship of the variables under study. The analysis showed that managerial skills had the strongest positive (Pearson correlation coefficient =.755 influence on organizational performance. In addition, board structure, organizational culture and customer relation management were positively correlated to organizational performance. The study established that board managerial skills were the most significant factor. The study recommends that the managers to be trained on leadership, financial management and strategic management skills in their organizations and large organizations which require a larger board size to manage them and they can have both internal directors and external directors. The organization culture should be the one that can promote organizational performance. The organizations should ensure that there is good customer relationship. The study recommends for similar studies to be undertaken in other state corporations for generalization of the findings of this study. There is also need to undertake another research to examine the other factors affecting performance of agricultural state organizations in Kenya. Key Words: Board managerial skills, Board Structure, Organization Culture, Customer Relation Management, Organizational performance