Legal and Regulatory Framework as a Determinant of Effectiveness of Corporate Governance in State Corporations in Kenya

Abstract

This study sought to establish the determinants of effectiveness of Corporate Governance at state corporations in Kenya. Based on the literature, research hypotheses were formulated to investigate the relationships between legal & regulatory framework and the dependent variable. This study was based on The Agency and Stewardship theories. The research methodology selected was a descriptive survey design. The design ensures ease in understanding the insight and ideas about the problem.  The target population of the study was the managers in all the 151 state-owned corporations in Kenya. The sampled companies for the study were 46 representing 30% which were identified through systematic random sampling technique. Five managers from each of the 46 sampled companies were identified through systematic random sampling by purposeful sampling technique giving a total sample size of 230 managers. The key research instrument used was a 5-point-likert scale questionnaire ranging from 1-strongly disagrees to 5-strongly agree. Primary data was collected by use of   questionnaires which were administered through drop and pick method. 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. Correlation analysis technique was undertaken to determine whether there was a significant relationship between study variables. However regression analysis was performed so as to test the hypothesis and subsequently model the relationship between the variables. The study found out that Legal and Regulatory Framework was positively correlated with corporate governance in State Corporations in Kenya. The regression analysis led the study to conclude that legal & Regulatory Framework was critical in determining effectiveness of Corporate Governance in State Corporations in Kenya. Consequently the study recommended that stakeholders of State Corporations should enhance, Legal & regulatory framework to sustain effective Corporate Governance in these institutions. Finally further research was recommended to include other corporation’s not only state corporations.

Keywords:  Legal and Regulatory Framework, Corporate Governance, State Corporations