Effect of Corporate Governance on Financial Performance

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TABLE OF CONTENTS

Cover page…………………………………………………………………………. i

Declaration ………………………………………………………………………… ii

Dedication…………………………………………………………………………...iii

Acknowledgement…………………………………………………………………. iv

Table of Contents …………………………………………………………………. v

Abstract……………………………………………………………………………. vii

1.0 CHAPTER ONE: INTRODUCTION…………………………………….... 1

1.1 Background of the study…………………………………………………… ….1

1.2 Statement of the problem…………………………………………………….... 7

1.3 Research questions ……………………………………………………....…..…8

1.4 Objectives of the study…………………………………………………...……..8

1.5 Importance of the study………………………………………..………………. 9

1.6 Scope of the study…………………………………………...………………….10

1.7 Definition of terms…………………………...…………………………………10

1.8 Chapter summary……………………………………………………………. …12

2.0 CHAPTER TWO: LITERATURE REVIEW……………………………… 13

2.1 Introduction..…………………………………………………………………....13

2.2 theoretical framework…………………………………………………………..13

2.3 Good corporate governance and operating costs…………………………….…18

2.4 Correlation between good corporate governance and performance ratios……...20

2.5 Chapter summary……………………………………………………………… 24

3.0 CHAPTER THREE: RESEARCH METHODOLGY………………...……25

3.1 Introduction …………………………………………………………………… 25

3.2 Research design…………………………………………………………………25

3.3 Population ……………………………………………………...........................25

3.4 Sampling design……………………………………………………………. … 26

3.4.1 Sampling frame…………………………………………………………….....26

3.4.2 Sampling technique.……………………………………………………........ 26

3.4.3 Data collection methods…...…………………………………………………27

3.5 Data collection method…………………………………………………………28

3.6 Data analysis and presentation…………………………………………….……28

4.0 CHAPTER FOUR: DATA ANALYSIS AND FINDINGS…………………28

4.1 Introduction…………………………………………………………………….28

4.2 Background information………………………………………………………..28

4.3 Structure of governance…………………………………………………………29

4.4 Cost of governance……………………………………………………………...36

4.5 Institutionalisation of good corporate governance……………………………..38

5.0 SUMMARY, DISCUSSION AND CONCLUSION………………………..44

5.1 Introduction……………………………………………………………………44

5.2 Summary……………………………………………………………………….44

5.3 Discussion…………………………………………………………………….. 44

5.4 Conclusion……………………………………………………………………..46

5.5 Recommendations……………………………………………………………...46

5.6 Limitations of the study………………………………………………………..46

5.7 Suggestion for future research…………………………………………………46

REFERENCES………………………………………………………………….47

APPENDICES…………………………………………………………………..51

Appendix 1: Letter of introduction…………………………………….....51

Appendix 2: Questionnaire…………………………………………….....52

ABSTRACT

The purpose of this project was to gain a broad understanding of the financial implication of instituting good corporate governance. It sought to assess how good corporate governance impacts on the financial aspects of a company. The study was based on financial implications of good corporate governance among the quoted companies in the Motor Vehicle sector on the Main Investment Market Segment (MIMS) of the Nairobi Stock Exchange (NSE) as they command huge economic output in terms of their contributions to the Gross Domestic Product, employment and invested funds during the period 2002 to 2006. The companies were Marshalls East Africa, CMC Holdings and Car and General Ltd.

Descriptive research design was used. The population of interest was quoted companies in the Main Investment Market Segment (MIMS) board of the Nairobi Stocks Exchange (NSE) operating in the motor vehicle sector. The study used census survey. Primary data was collected using structured and semi-structured questionnaires that were self administered to the respondents. Secondary data was obtained from the published financial statements of the companies for the period between 2002 and 2006. Data was first edited for completeness and consistency. Statistical Package for Social Sciences was used as the tool of...
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