Influence of Corporate Governance on Financial Management in Tertiary Institutions in Nakuru County, Kenya

Abstract

Education is the cornerstone of socio-economic development of the society and the nation at large. There has been consistent increase in budgetary allocation towards education in the country. The Government of Kenya has already introduced mechanisms for cost sharing and user charges in higher education due to austerity in the public budget for higher education and poor performance of the sector to promote access and equity. Many tertiary educational institutions in Kenya, therefore, face financial challenges. The general objective of the study was to determine the influence of corporate governance on financial management in tertiary institutions in Nakuru County, Kenya. The specific objectives included to examine the influence of corporate culture, corporate leadership, legal responsibilities and transparency on financial management of these institutions. The theories reviewed in this study included organizational culture theory, stewardship theory, Carroll’s model of corporate social responsibility, institutional-centric theory of finances and agency theory. This study adopted a cross-sectional research design. The management and finance officers working with the tertiary institutions in Kenya constituted the target population. The 324 aforementioned staff working with the tertiary institutions in Nakuru County comprised the accessible population. Stratified random sampling was used to draw 58 respondents from the accessible population. A structured and self-designed questionnaire which was also self-administered was used to facilitate data collection. A pilot study was carried out amongst randomly selected management and finance staff working with tertiary institutions in Narok County. Data processing and analysis were aided by the use of the Statistical Package for Social Sciences (SPSS) Version 24. Data analysis constituted descriptive statistics. More so, the analysis encompassed inferential statistics in form of Spearman rank correlation and multiple regression analyses. The results of the analyses were presented in tables. The study revealed that corporate culture, corporate leadership, legal responsibilities, and transparency had significant influence on financial management of tertiary institutions in Nakuru County. The study concluded that tertiary institutions in Nakuru County practiced various forms of leadership. It was concluded that corporate leadership led to substantive improvement of financial management. It was concluded that greater adherence to legal responsibilities was likely to result in moderate enhancement in financial management in tertiary institutions. The study inferred that transparent governance, transparent faculty, and transparent remuneration system were important components of transparency in that they influenced financial management in tertiary institutions in Nakuru County. The corporate culture in tertiary institutions should be such that it facilitates more effective management of resources particularly funds. The study further recommended inculcation of facets of corporate leadership that are likely to guarantee improved financial management in tertiary institutions. The study recommended that there is no legal stipulation that should be violated for whatever reasons by the tertiary institutions. In addition, it was recommended that there ought to be regular financial reporting by the department concerned as opposed to relying on only annual financial reports.