INFLUENCE OF ACCOUNTABILITY ON FINANCIAL PERFORMANCE OF STATE-OWNED COMMERCIAL ENTERPRISES IN KENYA
INFLUENCE OF ACCOUNTABILITY ON FINANCIAL PERFORMANCE OF STATE-OWNED COMMERCIAL ENTERPRISES IN KENYA
Benaihia Kiptoo Bett - PhD Candidate, The Catholic University of Eastern Africa, Kenya
Dr. Kifleyesus Andemariam (PhD) - Lecturer, Department of Graduate Business Studies, School of Business and Economics, The Catholic University of Eastern Africa, Kenya
Dr. Kiflemariam Abraham (PhD) - Lecturer, Department of Graduate Business Studies, School of Business and Economics, The Catholic University of Eastern Africa, Kenya
ABSTRACT
Poor financial performance of state-owned commercial enterprises poses fiscal risks to the government and major challenges in competitiveness and overall national growth, hence the need to implement corporate governance strategies to stem this trend. This study examined the influence of accountability, as one of the corporate governance practices, on financial performance of state-owned commercial enterprises in Kenya. Stewardship theory anchored the study. Explanatory research design was adopted for a comprehensive consideration of the specified topic. Target population of the study comprised 476 board members and 379 corporate executives from 46 SOCEs in Kenya. Sample size comprised 153 board members and 142 corporate executives. Respondents’ selection was done through stratified random sampling. Collection of primary data was done using questionnaires. Data analysis was sourced from the Office of the Auditor General, which included reports and financial statements of SOCEs from July 2014 to June 2023. This period was considered because the Government of Kenya developed and implemented ‘Mwongozo’ code of governance for state corporations in January 2015. Data were analysed using descriptive statistics and testing of hypotheses done using covariance-based structural equation modelling (CB-SEM) with the aid of Analysis of Moment Structures (AMOS) software. Results obtained were presented using tables. Study findings showed that the influence of accountability (estimate = 0.261, critical ratio = 3.556, p < 0.001) on the financial performance of Kenyan SOCEs was positive and statistically significant. The study concluded that features of accountability, such as clarity of mandate, monitoring and evaluation, feedback system, compliance with applicable laws, and corporate social responsibility activities, contributed to financial performance of SOCEs. The study recommended that SOCEs should set up reporting systems that enable stakeholders to audit, assess and monitor SOCEs’ financial performance.
