The Effect of corporate governance mechanisms on the operational performance of small and medium-sized enterprises in Nairobi
Date
2020-11
Authors
Ranka, Moses
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Entrepreneurial firms require good operational performance to achieve full profits potential of the
business. They also require inputs on business operations, good strategy and best practices in the
industrial sector. In order to realize this, good corporate governance practices are vital in assisting
SMEs (small to mediumāsized enterprises) in improving on their operational performance. The
issue of corporate governance has been a growing area of management research especially among
SMEs firms. The limited studies in the area with respect to SMEs have focused mainly on
developed economies. This study therefore sought to examine the effects of corporate governance
on the operational performance of SMEs. The study specifically assessed the adoption of corporate
governance structures among SMEs by testing for the effects of formal board, board roles, board
competency and audit committee on the performance of SMEs. The main objective of the study
was to determine the effect of corporate governance mechanisms on the operational performance
of SMEs in Nairobi. The specific objectives of the study were to examine the influence of the
existence of SME board on the operational performance of the SMEs in Nairobi; to establish the
effect of board roles and mandates on the operational performance of the SMEs in Nairobi; to
determine the effect of Board Managerial competency on the operational performance of the SMEs
in Nairobi and to establish the effect of audit committee on the operational performance of the
SMEs in Nairobi. The study target population was drawn from 83 selected managers of SMEs in
Nairobi. The sourced data was quantitative primary data. In analyzing quantitative data, the study
used descriptive statistics. In addition, regression analysis was used to determine the significance
of independent variables affecting the operational performance of the SMEs. The results of the
study indicated that corporate governance mechanisms sampled on the study had a positive
influence and significant on the operational performance of the firms except for the formal board
which was not significant. The regression analysis established that audit committee contributes
most to the operational performance of SMEs followed by board competency, board roles and
formal board respectively. The study recommends that the management of SMEs should monitor
the size of the board to ensure there are smooth coordination; board duality and composition, which
are very important to operational performance of the SMEs. Finally, the study also recommends
that SMEs should hold committee meetings regularly and they should be keen on the audit
committee composition. The main contribution of this study to knowledge lies in the effort to
strengthen the corporate governance of SMEs in order to positively help in improving the
operational performance of firms.
Description
A Thesis submitted in partial fulfillment of the requirements for the award of the Degree of Masters of Business Administration at Strathmore University Business School
Keywords
Operational performance, Entrepreneurship, Corporate governance