Corporate governance and financial performance of water companies in Kenya

Corporate governance has received its fair share of attention in the past decade due to various \nnotable corporate scandals and collapses of large corporations which cause was traced to \nunethical business practices. Corporate governance is meant to create a balance between the \ninterests of the management and the various stakeholders. It aims to ensure the company strives \nto achieve its set objectives whilst having the interests of all the stakeholders at heart. Amongst \nkey indicators of success in business is financial performance of an entity. Financial \nperformance generally refers to the financial health of an entity over a given period. It \ndetermines the return to shareholders. Financial performance of an entity is dependent on \nvarious factors. The target population in this study was all the 65 water companies in Kenya that \nwere registered with WASREB as at 31st December 2015. 20 companies were selected for \nstudy based on the size of operations and period of existence. The study used secondary data. A \ndata collection form was used to collect the data on corporate governance variables. The \ninstrument was designed to capture a broad range of data required by the researcher and \nspecifically capture the board size, CEO duality, existence of audit committee, and frequency of \nmeetings and whether there are independent directors. Financial performance was represented \nby ROA, which is net income divided by Total Assets for the last three financial years 2011/12 \nto 2013/2015 and are available at the Auditor General and WASREB. The study finding \nindicated that all the independent variables have positive coefficient. The regression results \nabove reveal that there is a positive relationship between dependent variable (overall \nperformance) and independent variables (CEO duality, size of the board, number of the board \nmeetings, board composition and size of the firm and gender diversity of board.