Corporate Governance and Performance of Private Security Firms in Kenya

Abstract

The general objective of the study was to examine the relationship between corporate governance and performance of private security firms in Kenya. The specific objectives of the study were as follows: To determine the relationship between shareholder assembly and performance of private security firms in Kenya; To assess the relationship between board characteristics and performance of private security firms in Kenya; To establish the relationship between CEO-Board Collaboration and performance of private security firms in Kenya; To determine the relationship between ethical leadership on performance and private security firms in Kenya; To assess the moderating influence of competitive environment on the relationship between the corporate governance and performance of private security firms in Kenya. The study is grounded on the Agency Theory, Stewardship Theory, General Systems Theory, Cognitive Moral Development Theory, Competitive Advantage Theory and Firm Theory. A conceptual framework has been illustrated to show the relationship among the variables. The study applied descriptive analysis with a positivist approach. The study participants were members of Kenya Security Industry Association (KSIA) and Protective Security Industry Association (PSIA), since they have representation in Private Security Regulatory Authority (PSRA) board. The private security firms have a complement of 896 (336 board members and 560 managers) according to the Human Resource departments in the private security firms to be studied. The study sample size was 384 respondents and used stratified random sampling technique. Structured questionnaires and performance reports were used in eliciting data. The study adopted a questionnaire as the data collection instruments to compliment by other secondary sources. After the pilot testing and all necessary modifications, the questionnaires were subjected to reliability and validity tests and then administered directly to the respondents. Descriptive analysis, factor analysis, Pearson correlation, analysis of variance (ANOVA) and regression were carried out to analyze data using SPSS. The study used bivariate regression analysis and moderated multiple regressions to analyze the association between corporate governance and performance of security firms ‘variables. The qualitative data was analyzed by the use of content analysis. Results revealed that all the corporate governance practices had a positive and significant relationship with performance of private security of firms in Kenya. However, the magnitude of the influence was different for the specific corporate governance practices. Board characteristics had the largest effect followed by CEO-board characteristics then ethical leadership and finally the shareholder assembly. Further, the results showed that competitive environment had a significant moderating effect on the relationship between corporate governance practices and performance of private security firms in Kenya. The results support the current theories related to the study. Consequently, this study provides security firms with insights of how to improve performance through the adoption of appropriate corporate governance practices. The findings contribute to a deeper understanding of the role of corporate governance in shaping the strategic direction, risk management practices, and ethical conduct of private security firms in Kenya, with implications for stakeholders including investors, regulators, policymakers, and industry practitioners. However, limitations of the study include potential biases in the secondary data sources, constraints in data availability and quality, and the inability to establish causality due to the observational nature of the research. Despite these limitations, the study provides valuable insights into the governance-performance nexus in the private security sector and identifies avenues for future research and policy development in this area.