The Effect of Board Characteristics on the Fiancial Sustainability of Commercial State Corporations in Kenya

Abstract

Boards of directors serve as a critical link between shareholders and management, guiding strategy, oversight, and long-term financial health. Effective boards mitigate agency conflicts, enhance decision-making, and foster accountability. This study examines the impact of board characteristics and firm size on the financial sustainability of commercial state corporations, addressing gaps in corporate governance research. Using a quantitative, cross-sectional approach, 32 out of 46 commercial state corporations were analyzed. Results show a negative but non-significant relationship between board characteristics and financial sustainability, contrasting with prior studies that suggest effective boards enhance performance. Firm size had a positive but non-significant association with financial sustainability. In contrast, the interaction between board characteristics and firm size was marginally significant and negative, indicating potential inefficiencies in larger organizations. The findings reveal the complexity of financial sustainability in state corporations, suggesting that board characteristics and firm size alone are insufficient to explain outcomes. Further research is needed to explore additional factors and contextual gradations influencing financial sustainability in state-owned enterprises.

Keywords:       Board Characteristics, Firm Size, Financial Sustainability, State Corporations