The relationship between Board Practices and Organizational Performance by Government Owned Entities in Kenya

Abstract

The poor performance and increased incidences of corruption in government owned entities in Kenya have ignited public debate on the role of boards in governance and management of public institutions. Good and effective board practices provide the essential link to enhanced performance. However, a number of research findings on impact of board practices on performance have been contradictory and mixed. The study objective was to examine relationships between board practices and organizational performance by government owned entities. Hypotheses: board practices do not significantly influence performance. Data for board practices indicators were sought through semi structured questionnaires from all 234 government-owned entities operating in Kenya as at 31st December, 2022. A total of 153 government owned entities returned properly filled up questionnaires representing 65.38% of population. Secondary data on performance were derived from performance contracting reports. Descriptive statistics, correlation analysis and CB-SEM together with AMOS application version 26.0 were used as tools of analysis. Agency theory was adopted as the anchor theory. The findings established that board practices have significant and positive effect on performance by government owned entities as depicted by R² value of 61.9% indicating that independent variable accounted for about 62% change in dependent variable, performance. The study findings have shed light on the crucial role of good board practices in enhancing organizational performance in government owned entities. The availability of such practices, including effective audit committee practices, has been shown to be strongly associated with improved organizational performance. The presence of effective and good board practices enables an organization to safeguard its assets, ensure the accuracy of financial records, detect and prevent fraud leading to revenue growth and improved overall performance.

Keywords: Board Practices, Government Owned Entities, Organizational Performance