Corporate Governance and Financial Performance: Theoretical and Philosophical Predicaments in Research

Theories and philosophical approaches in research are crucial to the understanding of the overall perspective from which the study is designed and carried out. However, inconsistencies in theory and duality in philosophical paradigms leads to predicaments as to which approach is suitable in a certain area of inquiry. This paper examines some of the theoretical and philosophical predicaments faced by researchers in corporate governance. This is achieved by identifying and discussing controversies in theories and philosophical approaches applicable in corporate governance studies. A review of theoretical literature shows lack of a unitary perspective to explain the relationship between corporate governance and firm financial performance. Consequently, researchers may have to adopt a multi-theory approach by taking views of property rights agency, resource based and stewardship and stakeholder’s theories to understand different perspectives of corporate governance. The multiplicity of theories and inconsistencies of expected relationships between variables also creates dilemma to researchers in predicting the relationships between corporate governance variables and firm performance. The duality of philosophical paradigms and divergent assumptions of ways of knowing also creates dilemma as to which is the best approach to apply in corporate governance research. This study found that most corporate governance studies opts for objectivism position in ontology which leads to positivism view in epistemology, associated with value free axiology, deductive approach and application of quantitative methods. This is in contrasts to the choice of subjectivism position in ontology which leads to the selection of interpretivism stance in epistemology and consequently value laden position in axiology. Subjective approach also leads to inductive approach and application of qualitative methods of data collection and analysis. It is therefore concluded that identification of ontology at the start of the research process is crucial in determining the choice of the research design. Keywords: Corporate Governance, Theory, Philosophy

The Influence of Change in Corporate Governance on Financial Performance of Privatized Companies in Kenya

This study examined the influence of change in corporate governance structure on financial performance of privatized companies in Kenya for the period 2007-2013. Unlike previous studies, four performance indicators were used and include: Return on Assets (ROA), Tobin’s Q, cost efficiency and technical efficiency. The cost and technical efficiency values were computed using the Stochastic Frontier Analysis (SFA). Data was extracted from financial reports of privatized firms, obtained from the Capital Markets Authority (CMA) and the Nairobi Stock Exchange (NSE). A unit root test was conducted to examine stationality of data while a Hausman test was used to determine whether to use the Fixed Effects (FE) or the Random Effects (RE) regression model. A regression model with a robust standard error option was used to control for heteroscedasticity and contemporaneous correlation which could cause spurious results. The study found that board composition has a positive influence on ROA, Tobin’s Q and cost efficiency of privatized companies. The board size has a negative influence on the Tobin’s Q while gender has a negative influence on ROA. In view of these findings, this study recommends that corporate boards of privatized companies should be restructured further to enhance financial performance. Consequently, the board size should be reduced to between seven and nine to enhance coordination and faster decision making. The percentage of women directors should be increased to meet the constitutional threshold of at least 30%. However, the appointment of women directors should be based on skills and expertise required by a firm to improve financial performance. The board composition should also be enhanced to enable privatized companies to attract managerial and technical expertise from non-executive directors which is crucial to improving the financial performance. Keywords: Privatization; Corporate Governance; SOEs; Financial Performance; Kenya

Corporate Governance and Financial Performance: a literature Review of Measurements and Econometric Methods of Data Analysis in Research

One of the major challenges to policy makers is the identification of standard framework to examine the effects of corporate governance on firm financial performance. This study examines the key corporate governance and financial performance variables and the methods of data analysis used in academic research. The study observes that most studies use ownership structure and corporate boards as the key explanatory factors to firm performance. Ownership structure is defined by the percentage of shareholders who include: the government, foreign and institutional shareholders, large individuals and dispersed owners. Financial performance has been measured using three different types of indicators. Some studies use accounting-based ratios such as Return on Assets (ROA) and Return on Equity (ROE) while others use the Tobin’s Q ratio. Some studies also use efficiency indicators computed using the Data Envelopment Analysis (DEA) and Stochaistic Frontier Approach (SFA). It is also apparent that most studies in corporate governance research use panel data and the shareholding, corporate boards and financial information is extracted from financial reports obtained from the stock exchanges. Most of the studies use a combination of descriptive statistics, correlation and regression analysis to examine the relationships between ownership structure, corporate boards and firm performance. Due to problems associated with panel data, a unit root test is used to examine stationarity of data while a Hausman test determines whether to use a Fixed Effects (FE) or Random effects regression model. A regression model with a robust standard error option is often used to control for heteroskedasticity and contemporaneous correlation which may lead to spurious results

Foreign Exchange Risk Hedging, Corporate Governance and Financial Performance: Evidence From Kenya

Globalization, Kenya’s floating foreign exchange rate regime, and international trade have exposed Kenyan firms to foreign exchange risk. Empirical studies have demonstrated that hedging minimizes cash flow volatility, hence enhancing financial performance.  The management of these risks is critical in overall financial management, since its helps increase the financial performance and the overall returns earned by investors. Understanding factors that influence foreign exchange risks hedging is a crucial step to the effectiveness of the overall risk management process. Against this background, this study sought to evaluate the effects of foreign exchange risk hedging, corporate governance and the financial performance of listed companies in Kenya. The target population constituted all the 54 firms that were continuously listed on the Nairobi Securities Exchange during the study period, from 2011 to 2016. The study used longitudinal research design. Secondary data was obtained from financial statements of the listed firms. The data was coded and analysed using descriptive and inferential statistics—correlation and regression—with the aid of STATA software. The feasible generalised least square model was used to test the hypotheses. The results show currency hedging has a positive effect on financial performance.  The study also revealed that corporate governance, moderates the relationship between foreign exchange risk hedging and financial performance. In the light of this findings, management should explore the whole repertoire of risk amelioration techniques, particularly those available in the roster of innovative techniques of hedging. In order to take full advantage of such techniques, however, the regulator and the securities exchange must lead from the front by introducing cutting-edge financial instruments. In addition firms should endeavor to strengthen corporate governance which enhances the effectiveness of risk management. Keywords: Foreign Exchange risk, Hedging Techniques, Corporate Governance. DOI: 10.7176/RJFA/10-5-08 Publication date:March 31st 201

The Effects of Ownership and Corporate Governance Reforms on Efficiency of Privatized Companies in Kenya

This study investigated the effects of ownership and corporate governance reforms on efficiency of privatized companies in Kenya for the period 2007-2013. Data was extracted from financial reports. A unit root test examined stationarity of data. A fixed effects regression model with a robust standard error option was used to control for firm specific effects which could bias results. The results indicate government ownership has a negative effect on cost and technical efficiency. Local institutional investors influence technical efficiency positively. Large individual shareholders have a positive influence on cost efficiency while dispersed ownership influence cost efficiency negatively. Both non-executive and women directors influence cost efficiency positively. This study recommends further reduction of state and dispersed ownership to pass more ownership and control to institutional investors. Diversity in corporate boards should be enhanced to enable firms to attract managerial and technical expertise from the non -executive and women directors. Keywords: Privatization; SOEs; Efficiency JEL Classifications: G32, H2

Supply-chain strategies for essential medicines in rural western Kenya during COVID-19

Problem: The coronavirus disease 2019 (COVID-19) pandemic has disrupted health systems worldwide and threatened the supply of essential medicines. Especially affected are vulnerable patients in low- and middle-income countries who can only afford access to public health systems. Approach: Soon after physical distancing and curfew orders began on 15 March 2020 in Kenya, we rapidly implemented three supply-chain strategies to ensure a continuous supply of essential medicines while minimizing patients' COVID-19 exposure risks. We redistributed central stocks of medicines to peripheral health facilities to ensure local availability for several months. We equipped smaller, remote health facilities with medicine tackle boxes. We also made deliveries of medicines to patients with difficulty reaching facilities. Local setting: Τo implement these strategies we leveraged our 30-year partnership with local health authorities in rural western Kenya and the existing revolving fund pharmacy scheme serving 85 peripheral health centres. Relevant changes: In April 2020, stocks of essential chronic and non-chronic disease medicines redistributed to peripheral health facilities increased to 835 140 units, as compared with 316 330 units in April 2019. We provided medicine tackle boxes to an additional 46 health facilities. Our team successfully delivered medications to 264 out of 311 patients (84.9%) with noncommunicable diseases whom we were able to reach. Lessons learnt: Our revolving fund pharmacy model has ensured that patients' access to essential medicines has not been interrupted during the pandemic. Success was built on a community approach to extend pharmaceutical services, adapting our current supply-chain infrastructure and working quickly in partnership with local health authorities

Effect of Remittances on Economic Growth of Sub Saharan African Countries

This research paper investigate the effect of immigrants ’remittances on economic growth on 36 Sub Saharan Africa countries spanning from 1980-2015. The previous studies are limited to the examination of the effect of remittances based on aggregated data. This work extends these earlier studies by examining the effect of remittances based on temporary and permanent components. System GMM estimation technique was used and the results showed that both remittances from temporary migrants and permanent migrants contribute positively to economic growth but the contribution by temporary migrants is relatively higher. This paper recommends  that policy makers should enhance easy access to foreign currency accounts and foreign currency denominated bonds with permission to repatriate, thereby stimulating additional remittances from  permanent migrants  who are likely to belong to professional and high skilled  categories. In order to maximize the beneficial impacts, temporary migrants’ remittances should be redirected towards productive projects. This may include strengthening of good infrastructure which may promote trade and enable ease of access of services. Keywords: Economic growth, Remittances, System GMM, Sub Saharan Afric

Community-based medication delivery program for antihypertensive medications improves adherence and reduces blood pressure

Non-adherence to antihypertensive medications is a major cause of uncontrolled hypertension, leading to cardiovascular morbidity and mortality. Ensuring consistent medication possession is crucial in addressing non-adherence. Community-based medication delivery is a strategy that may improve medication possession, adherence, and blood pressure (BP) reduction. Our program in Kenya piloted a community medication delivery program, coupled with blood pressure monitoring and adherence evaluation. Between September 2019 and March 2020, patients who received hypertension care from our chronic disease management program also received community-based delivery of antihypertensive medications. We calculated number of days during which each patient had possession of medications and analyzed the relationship between successful medication delivery and self-reported medication adherence and BP. A total of 128 patient records (80.5% female) were reviewed. At baseline, mean systolic blood pressure (SBP) was 155.7 mmHg and mean self-reported adherence score was 2.7. Sixty-eight (53.1%) patients received at least 1 successful medication delivery. Our pharmacy dispensing records demonstrated that medication possession was greater among patients receiving medication deliveries. Change in self-reported medication adherence from baseline worsened in patients who did not receive any medication delivery (+0.5), but improved in patients receiving 1 delivery (-0.3) and 2 or more deliveries (-0.8). There was an SBP reduction of 1.9, 6.1, and 15.5 mmHg among patients who did not receive any deliveries, those who received 1 delivery, and those who received 2 or more medication deliveries, respectively. Adjusted mixed-effect model estimates revealed that mean SBP reduction and self-reported medication adherence were improved among individuals who successfully received medication deliveries, compared to those who did not. A community medication delivery program in western Kenya was shown to be implementable and enhanced medication possession, reduced SBP, and significantly improved self-reported adherence. This is a promising strategy to improve health outcomes for patients with uncontrolled hypertension that warrants further investigation