Contribution of Corporate Governance Leadership Practices on Performance of Listed Companies in Kenya

Abstract

Leadership is a process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task. Corporate governance has dominated leadership policy agenda in developed market economies for more than a decade and African continent is gradually adopting it on their policy agenda on leadership and governance of their organisations. The Nairobi Securities Exchange (formerly Nairobi Stock Exchange) (NSE) is the only listing company in Kenya. The study main objective was to establish the contribution of Corporate Governance leadership practices on performance of Listed Companies in Kenya. The specific objectives were to study contribution of leadership structures; composition; independence; stakeholders' ownership and ownership concentration on the performance of listed companies in Kenya. The study relied on a positivist research philosophy and adopted survey research design. The study population was Sixty-Two firms listed on Nairobi Securities Exchange. Probabilistic sampling techniques was employed in determining the sample size of the study. Stratified sampling was first applied to group the Sixty-Two companies into nine categories (strata). Once the companies were grouped into strata, nine companies were selected using simple random sampling from which a sample size of Two Hundred and Thirty-Seven was determined. The study used primary data which was collected using questionnaires. Pilot testing was done equivalent to 10% of the sample size (Twenty-Four respondents) to check the liability and validity of the questionnaires. Data was analysed quantitatively and qualitatively and presented descriptively and illustrated by use of tables and charts. Information was sorted, coded and input into the statistical package for social sciences (SPSS) for production of graphs, tables, descriptive statistics and inferential statistics. Overall, the study concluded that corporate governance leadership practices had a positive contribution on performance of listed companies in Kenya. Specifically, the study established that corporate governance leadership composition and ownership concentration made the most positive contribution, among the independent variables investigated. The research revealed that outsider leaders have more impact on the company performance as they have enough incentive to monitor the company operations since their own reputations depend on it. The study recommended that listed companies should apply viable leadership structures for the realisation of sustainable company growth; ensure that the leadership composition embrace the expertise from financial management, industry of the company and corporate governance to guide on effective leadership strategies; ensure strict adherence to corporate governance principles on leadership independence for optimum performance of the leaders; ensure that emotional cancer does not get on the way of managing the operations of listed companies because it affects the stakeholders contribution to the performance of the company; embrace the principle of stakeholders' ownership in the management of listed companies affairs; initiate a strong effective ownership concentration so that urgent resolutions can be achieved on the best interest of the company without holding the action up to the next AGM. The findings from the study significantly benefit investors, Board of Directors, shareholders, NSE, CMA and government officers in terms of effective policy development, awareness of challenges and suggested solutions that affect the optimal operations of listed companies in Kenya. The study also benefits scholars, researchers and students in terms of opening up a new frontier of information that enhance their understanding on this important and steadily growing thematic area on corporate governance in Kenya, as well as suggestions on future studies.