Corporate Governance and Organizational Performance Moderated by Organizational Factors: A Survey of Listed Companies at Nairobi Securities Exchange, Kenya

Abstract

A company is fundamentally oriented towards sustainable profit and growth primarily for the benefit of its shareholders. However, there is a broader responsibility towards other stakeholders. Corporate failures have been witnessed both locally and around the globe. The ramifications of corporate failures have been widely felt particularly for companies which are listed on securities exchanges, and include, decline in shareholders’ wealth, reduction of job opportunities and negative effects on economies of countries, among others. Some of the failures have been linked to poor corporate governance. A securities exchange is one of the most important vehicles used in mobilising resources from the public for investments in many parts of the world. The performance of companies listed at a securities exchange therefore is of great interest to investors. In Kenya, there has been concern over the performance of listed companies at the Nairobi Securities Exchange. Consequently, this study sought to evaluate the effect of corporate governance on organizational performance of the companies listed at Nairobi Securities Exchange. The study dealt with four determinants or components of corporate governance; corporate leadership, organizational structure, strategic management process and organizational culture, and their effect on organizational performance of the listed companies at the securities exchange, while controlling the influence of organizational factors. The study was anchored on a number of theories; the agency theory, dynamic capabilities theory, upper echelons theory, institutional theory, Edgar Schein theory and the balanced scorecard model. Pragmatism that supports the use of both qualitative and quantitative methods, was the philosophical foundation used by the researcher in the study. A mixed methods research design was used to deploy both closed and open-ended questions. The study used census approach on a study population of the sixty listed companies at the securities exchange as at 30th June, 2022. The study collected primary data using semi-structured questionnaires which were tested for validity and reliability. Nvivo software was used to extract insights from qualitative data while quantitative data was analysed using SPSS version 29 for descriptive and inferential statistics progressively. Tables and figures were used to present findings for ease of understanding. The study found that corporate leadership (p<0.05), organizational structure (p<0.05), and strategic management process (p<0.05) had significant effect on organizational performance while organizational culture (p>0.05) had an insignificant effect. It was also found that organizational factors (p>0.05) did not have a moderating effect in the relationship between corporate governance and organizational performance. These findings were expounded by qualitative findings: leadership qualities and practices, shape company success or failure significantly; geographical challenges, rigidity, agility, communication, delegation and family influence affect companies; and strong leadership, clear communication, alignment, adaptability, and systematic strategic management drive success. The study recommends further investigation of leadership competencies and styles across different organizational contexts with a focus on cross-cultural dimensions, exploring the global applicability of organizational structure and performance while considering industry-specific dynamics and cultural influences. It also recommends the examination of the relationship between strategic management process and organizational performance through longitudinal studies, analyzing the connection between organizational culture and performance across diverse contexts, and exploring why certain organizational factors have differing effects in various contexts, emphasizing the importance of industry-specific variables and diverse business environments.