The role of corporate governance practices on financial performance of not-for-profit faith-based Hospitals in Central Kenya

Abstract

The main objective of this study was to assess the role of corporate governance practices and their effect on financial performance of not-for-profit faith-based hospitals in central Kenya. The study sought determined whether there is a relationship between governance practices of accountability, stakeholder engagement, setting shared strategic direction, stewardship, board empowerment and financial performance of not-for-profit faith-based hospitals in central Kenya. The study used a descriptive research design. The target population consisted of the not-for-profit faith-based hospitals in the former central province of Kenya with a bed capacity of one hundred or more inpatient beds while the respondents were board members, (including the chief executive and other senior managers who sit in the boards) of these facilities. The study used purposive and stratified sampling technique to obtain its sample. Questionnaires and personal interviews were the data collection instruments while secondary data was collected from the institutions audited financial statements. Quantitative techniques were used to analyze data where both descriptive and inferential statistics were used. From the regression results, corporate governance practices of accountability, stakeholder engagement, setting a shared strategic direction, stewardship and board empowerment had a significant and positive effect on the financial performance of faith-based hospitals in central Kenya. The study recommends that boards intentionally and actively involve all stakeholders in the decision-making process of organizations in order to ensure that the interest of all the stakeholders and taken care of. The board should also set and communicate a shared strategic direction so that everyone in the organization understands and supports its execution. Board members should be properly inducted and continuously trained on governance to ensure that they execute their governance mandate effectively. Selection of board members should also take into account the required skills mix as well consider equitable gender representation in the boards.