The Influence of Change in Corporate Governance on Financial Performance of Privatized Companies in Kenya

Gitundu Esther Wanjugu, Sifunjo E. Kisaka, Kibet Lawrence Kangogo, Kiprop Symon Kibet


This study examined the influence of change in corporate governance structure on financial performance of privatized companies in Kenya for the period 2007-2013. Unlike previous studies, four performance indicators were used and include: Return on Assets (ROA), Tobin’s Q, cost efficiency and technical efficiency. The cost and technical efficiency values were computed using the Stochastic Frontier Analysis (SFA). Data was extracted from financial reports of privatized firms, obtained from the Capital Markets Authority (CMA) and the Nairobi Stock Exchange (NSE). A unit root test was conducted to examine stationality of data while a Hausman test was used to determine whether to use the Fixed Effects (FE) or the Random Effects (RE) regression model. A regression model with a robust standard error option was used to control for heteroscedasticity and contemporaneous correlation which could cause spurious results. The study found that board composition has a positive influence on ROA, Tobin’s Q and cost efficiency of privatized companies. The board size has a negative influence on the Tobin’s Q while gender has a negative influence on ROA. In view of these findings, this study recommends that corporate boards of privatized companies should be restructured further to enhance financial performance. Consequently, the board size should be reduced to between seven and nine to enhance coordination and faster decision making. The percentage of women directors should be increased to meet the constitutional threshold of at least 30%. However, the appointment of women directors should be based on skills and expertise required by a firm to improve financial performance. The board composition should also be enhanced to enable privatized companies to attract managerial and technical expertise from non-executive directors which is crucial to improving the financial performance.

Keywords: Privatization; Corporate Governance; SOEs; Financial Performance; Kenya.

Full Text: PDF
Download the IISTE publication guideline!

To list your conference here. Please contact the administrator of this platform.

Paper submission email:

ISSN (Paper)2222-1697 ISSN (Online)2222-2847

Please add our address "" into your email contact list.

This journal follows ISO 9001 management standard and licensed under a Creative Commons Attribution 3.0 License.

Copyright ©