Influence of Board Attributes and Information Technology Maturity on Performance of State-Owned Enterprises in Kenya

Abstract

Empirical research on corporate governance and particularly on the role of boards with regards to corporate performance has been growing over the last decade. Most of these studies have focused on listed companies indicating that a lot of attention has been laid in strengthening the corporate governance of these institutions. However, corporate failures and malfeasance continue to be experienced. There has been a spirited effort by the public sector to replicate the corporate governance practices and board attributes set by the private sector but the results in terms of improved performance have been mixed. Increasingly the influence of board attributes, especially structure, role, operating environment and demographics, on organizational performance has been questioned. Considering the uniqueness of having the government and public as principals in governance of state-owned enterprises and the attendant challenges of clarity of objectives, transparency and political insulation, information generation and sharing is critical. The role of information technology maturity of state-owned enterprises in determination of how successfully they are governed by their boards and the ultimate performance remains questionable. This study sought to assess the influence of board attributes on the performance of state-owned enterprises in Kenya applying an integrated analytical framework. The population of the study was the 145 state owned enterprises that had participated in performance contracting over the five-year period 2010 to 2015 in Kenya. Using multistage sampling technique, a stratified sample of 75 respondents was selected from 145 organizations. The main instrument of primary data collection was self-administered semi-structured questionnaire, administered on a stratified sample comprising senior managers. Secondary data was collected from the State Corporations Advisory Committee Secretariat as well as from company secretaries of selected corporations. Reliability and convergent validity of the questionnaire was tested using the Cronbach’s alpha and principal component analysis respectively. Descriptive statistics of means and standard deviation of Likert scores were calculated. The study found that board structure; board operating environment, board demographics, and board role and information technology maturity were positively correlated with performance of state-owned enterprises in Kenya. Regression analysis established that board structure; board operating environment and board role had statistically significant influence on performance of state-owned enterprises in Kenya. However, board demographics did not statistically significantly influence performance of state-owned enterprises. Information technology maturity moderated the relationship between and board attributes and performance of state-owned enterprises in Kenya. Further, the four predictor values considered statistically significant (board structure, board operating environment, board role and information technology maturity) accounted for 58.1% of the variations in performance of state-owned enterprises. The study recommends that board attributes that support performance be adopted and considered in development of new codes for governance; and that further research be undertaken applying integrated theoretical framework for corporate governance and taking into consideration external governance mechanisms; longitudinal methodology and comparisons with private organizations in similar sectors.