Effect of corporate governance on the financial performance of state owned enterprises in Zambia.

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Chikuta, Sidney
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The University of Zambia
Corporate governance is a mix of guidelines, practices and procedures by which organizations are guided and controlled. This study was focused at investigating the effect of Corporate Governance on the Financial Performance of State-Owned Enterprises (SOEs) in Zambia, focusing on State-Owned Enterprises in Lusaka Zambia. Financial performance of SOEs was measured using return on assets while corporate governance attributes used included board composition, independent committees, board size and firm size. A random sample of 165 respondents from SOEs was selected for the study out of which 125 respondents completely answered and returned the questionnaires. This gave a response rate of 75.7% which was very satisfactory. The data was analysed using descriptive statistics and multiple regression analysis. The study found that independent committees, board size and board composition negatively impacted financial performance of SOE’s. This is because SOEs spend more money with respect to their size which ends up reducing finances for SOEs. Furthermore, the research found that the bigger the size of the firm, the higher the standings of its financial performance. In addition, the research found a positive correlation between corporate governance and financial performance of SOEs. Therefore this implies that exercising excellent corporate governance enhances financial performance of SOEs and vice versa. The study therefore recommends that SOEs should focus their efforts towards reducing board size, independent committees and board compositions if they want to improve their financial performance. Furthermore, SOEs should continue to invest in projects that will enable them acquire huge market shares which will result in growth in their financial status. Keywords: Corporate Governance, Financial Performance, State Owned Enterprises
Corporate governance--Zambia , Financial Performance--State Owned Enterprises--Zambia