The Relationship Between Corporate Governance Practices and the Financial Performance of Top 100 Small and Medium Enterprises in Kenya

The Capital Markets Authority published “code of corporate Governance Practices “for \npublic listed companies in Kenya which was Gazetted on 4th March,2016.The new code of \ngovernance is based on apply or explain principle which requires companies to follow set out \ncorporate governance codes. The country having experienced corporate malpractices like the \nCMC ,Imperial Bank, Uchumi, Mumias, Kenya Airways, Transcentury which were very \ncostly to public investors needed to take immediate action to prevent a corporate crises. \nThe study investigates the relationship between corporate governance and the performance of \nTop 100 SMES in Kenya. It adopts descriptive research methodological framework through \nwhich the secondary data collected were analyzed using both Regression analysis and Karl \nPearson’s correlation techniques to find the relationship between corporate governance and \norganizational performance on one hand and the degree of relationship between corporate \ngovernance and organizational performance. The findings shows that the Number of board of \ndirectors, percentage of inside ownership, number of board meetings are positively correlated \nto improved organizational performance while Number of board committees percentage of \noutside directors CEO duality was negatively correlated to organizational performance . \nOrganizations are encouraged to adopt good corporate governance practices to improve their \nperformance and also to protect the interest of the shareholders. Most importantly the \nregulatory authorities must ensure compliance with good governance and apply appropriate \nsanctions for non-compliance to help the growth and development of industries in the \ncountry. The main contribution of the study to knowledge lies in its effort in strengthening \ncorporate governance beyond the rights and responsibilities of different stakeholders in the \nmanagement of an organization into areas involving the relationship between finance \nproviders and an organization, compliance with legal, ethical and environmental needs of the \nsociety, among others. This contribution has in no small measure enhanced our understanding \nabout the interpretations which have shaped corporate governance in relation to \norganizational performance both in theory and practice.