Effect of Corporate Governance on Performance of Sugar Manufacturing Firms in Kenya: A Case of Sugar Manufacturing Firms in Western Kenya

Abstract

Corporate governance is increasingly becoming important in organization as an approach of improving performance. Corporate governance is the system through which organizations are directed and controlled. It is concerned with transparency, accountability and power relationship within and outside the organization. There has been an increasing importance in corporate governance in organizations in recent years. Some studies have argued for a positive relationship while others argued that there is a negative relationship between corporate governance and organizational performance. This study sought to determine the effect of corporate governance on organizational performance of sugar manufacturing firms in western Kenya. The research employed correlation survey design. The population of the study constituted of eleven sugar manufacturing firms in Western Kenya. A convenience sample of sugar manufacturing firms in Western Kenya was used for the study. Primary data was collected using structured questionnaires. Descriptive statistics was used to summarize the data. Pearson’s correlation coefficient was used to determine the relationship between corporate governance and organizational performance of sugar manufacturing firms, multiple regression analysis was used to determine the effect of corporate governance on organizational performance. Findings revealed that the corporate governance practices were positively related to the performance of sugar manufacturing firms in western Kenya, although not very strongly (r = 0.587, p < 0.05). This means that the corporate governance practices which involve board characteristics, board size, Top management characteristics and Shareholders communication policy and Continuous disclosure had an impact on the performance of Sugar firms in Western Kenya. The study recommended that there are other factors which influence performance of sugar manufacturing firms such as trade liberation and government intervention which normally introduce new variables that have an effect on the performance of Sugar firms in Western Kenya. The study also recommended areas of further research