Corporate Governance and Performance of County Governments in Kenya

CORPORATE GOVERNANCE AND PERFORMANCE OF COUNTY GOVERNMENTS IN KENYA

MACHEL WAIKENDA

UNITED STATES INTERNATIONAL UNIVERSITY –

AFRICA

SPRING 2019

CORPORATE GOVERNANCE AND PERFORMANCE OF COUNTY GOVERNMENTS IN KENYA

MACHEL WAIKENDA

A Dissertation Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Doctor of Business Administration (DBA)

UNITED STATES INTERNATIONAL UNIVERSITY –

AFRICA

SPRING 2019

STUDENT’S DECLARATION

I, the undersigned, declare that the research herein is work originally done by me and that it has not been presented to another university or institution except to the United States International University – Africa in Nairobi for academic credit.

Signed______Date______

Machel Waikenda (ID 648969)

This project has been submitted for examination with our permission as the appointed supervisors.

Signed______Date______

Professor Peter M. Lewa

Signed______Date______

Professor Maina Muchara

Signed______Date______

Dean, Chandaria School of Business

Signed______Date______

Deputy Vice Chancellor, Academic and Student Affairs

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All rights reserved. No part of this proposal report may be recorded, photocopied, or reproduced in any other way, stored in retrieval system or transmitted in any mechanical or electronic form without the permission of the author or USIU-A.

ABSTRACT

The devolved system of governance was adopted to ensure development in all regions and effectiveness in service delivery for all Kenyans. This purpose of the study was to evaluate the corporate governance influence on the performance of county governments in Kenya. More so, the research intended; to determine the influence of inclusiveness of employees, functions of regulatory bodies, consensus orientation practices and stakeholders’ participation on performance of county governments in Kenya and further evaluate the moderating effect of political environment on corporate governance and performance of county governments in Kenya.

The study used a positivist research philosophy. According to the principles of positivism, the philosophy depends on quantifiable observations that lead themselves to statistical analysis. This aspect of positivism is relevant to this study as the researcher only based the findings on data collected from county governments.

The design methods used include the descriptive and explanatory cross-sectional survey method. The unit of analysis was the county governments. The counties in which data was collected helped in generalization of findings to all the Kenyan 47 counties. The unit of observation was county officials who included Governors, deputy Governors, County executive committee members, County secretaries, deputy County secretaries and MCAs.

For this study, a sample of 354 was arrived at. Simple random sampling method was adopted for the selection of the study participants. The study used a questionnaire for collection of primary data. Data analysis was done with the help of a statistical analysis program. Frequencies and descriptive statistics were obtained for the study’s variables and this information was presented in graphs and frequency tables. Both descriptive and inferential statistics were used. Inferential statistics included regression analysis that was used to test the significance between dependent and the independent variables.

The researcher observed respondents’ rights to privacy and safety. The study established that stakeholder’s participation, inclusiveness, consensus orientation, regulatory bodies and

political environment had a significant influence on the performance of county governments in Kenya. The study concluded that inclusiveness influences the performance of county governments in Kenya significantly and positively. The study also concluded that regulatory bodies positively and significantly influences performance of county governments in Kenya. The study further concluded that consensus orientation influences performance of county governments in Kenya. The study again concluded that stakeholder participation influences performance of county governments in Kenya positively. The study also concluded that political environment as a moderating variable influences county performance in the country positively. The study thus concluded that regulatory bodies had the greatest effect on the performance of county governments, followed by inclusiveness, and then stakeholders’ participation while consensus orientation had the least effect on their performance.

The study recommends that Governors need to sensitize county directors to work in consultation with other stakeholders to ensure that all feel part of the developmental agenda for the county. Since it was found that regulatory bodies have a positive and significant influence on county governments’ performance in Kenya, there is a need for county governments to set effective regulations through the Public Procurement Regulatory Authority so as to regulate and shape the county’s procurement procedures. This will ensure that no financial resources are unaccounted for. More studies need to be conducted to investigate corporate governance and performance of the central government in Kenya.

ACKNOWLEDGEMENT

My gratitude goes to my supervisors, Professor Lewa and Professor Muchara of United States International University (USIU) - Africa who have guided me throughout the research writing with their advice and constructive criticism.

Additionally, I would like to thank my entire family for the support that they have given me including the late hours and long days as I tirelessly worked on completing this project. Your support will always be appreciated.

Above all, I thank God for his mercy and grace.

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DEDICATION

I dedicate this dissertation to my fellow Kenyans, especially those who work in and with county governments, diligently serving others and looking for ways to perfect their craft and bring development to local communities. Never give up in your resolve to transform our beloved Nation.

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TABLE OF CONTENTS

STUDENT’S DECLARATION ...... iii COPYRIGHT ...... iv ABSTRACT ...... v ACKNOWLEDGEMENT ...... vii DEDICATION ...... viii LIST OF TABLES ...... xii LIST OF FIGURES ...... xvi ABBREVIATIONS AND ACRONYMS ...... xvii CHAPTER ONE ...... 1 1.0 INTRODUCTION ...... 1 1.1 Background of the Study ...... 1 1.2 Statement of the Problem ...... 6 1.3 Purpose of the Study ...... 8 1.4 Specific Objectives ...... 8 1.5 Hypotheses ...... 8 1.6 Justification of the Study ...... 9 1.7 Scope of the Study ...... 10 1.8 Definition of Terms ...... 10 1.9 Chapter Summary ...... 11 CHAPTER TWO ...... 13 2.0 LITERATURE REVIEW ...... 13 2.1 Introduction ...... 13 2.2 Theoretical Review ...... 13 2.3 Conceptual Framework ...... 33 2.4 Empirical Review ...... 43 2.5 Chapter Summary ...... 103 CHAPTER THREE ...... 104 3.0 RESEARCH METHODOLOGY ...... 104 3.1 Introduction ...... 104

3.2 Research Philosophy ...... 104 3.3 Research Design ...... 104 3.4 Population ...... 105 3.5 Sampling Design ...... 105 3.6 Data Collection Methods ...... 107 3.7 Research Procedures ...... 107 3.8 Data Analysis Methods ...... 109 3.9 Ethical Considerations ...... 111 3.10 Chapter Summary ...... 112 4.0 RESULTS AND FINDINGS ...... 113 4.1 Introduction ...... 113 4.2 Demography Data ...... 118 4.3 Inclusiveness ...... 124 4.4 Regulatory Bodies ...... 126 4.5 Consensus Orientation ...... 129 4.6 Stakeholder’s Participation ...... 131 4.7 Political Environment ...... 134 4.8 Performance of County Governments ...... 140 4.9 Inferential Statistics ...... 146 4.10 Diagnostic Tests for Regression Assumptions ...... 152 4.11 Data Analysis and Results of the Study Variables ...... 154 4.12 Chapter Summary ...... 173 CHAPTER FIVE ...... 174 5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ...... 174 5.1 Introduction ...... 174 5.2 Summary ...... 174 5.3 Discussion ...... 178 5.4 Conclusion ...... 199 5.5 Recommendations ...... 201 REFERENCES ...... 204 APPENDICES ...... 240

Appendix I: Introduction Letter ...... 240 Appendix II: Questionnaire ...... 241 Appendix III: County Performance in Kenya ...... 254 Appendix IV: Kenyan Map with all Counties ...... 255 Appendix VII: Normality Tests ...... 256 Appendix VIII: USIU Letter ...... 259 Appendix X: NACOSTI Certificate ...... 261 Appendix XI: Factor Analysis Results ...... 262

LIST OF TABLES

Table 3.1: Target population distribution ...... 105 Table 3.2: Sample distribution ...... 106

Table 4. 1: Response Rate ...... 113

Table 4. 2: Communalities ...... 114

Table 4. 3: Total Variance Explained ...... 115

Table 4. 4: Component Matrixa ...... 117

Table 4. 5: Reliability Analysis ...... 118

Table 4. 6: Respondents County ...... 120

Table 4. 7: Respondents Position ...... 121

Table 4. 8: Age of the Respondent ...... 121

Table 4. 9: Number of years Worked with the County ...... 123

Table 4. 10: Number of Tribes in the County ...... 123

Table 4. 11: Party Affiliation of the County ...... 123

Table 4. 12: Statements on Inclusiveness ...... 124

Table 4. 13: Correlation Analysis ...... 125

Table 4. 14: Model Summary ...... 125

Table 4. 15: ANOVA ...... 125

Table 4. 16: Coefficients ...... 126

Table 4. 17: Statements on Regulatory Bodies ...... 127

Table 4. 18: Correlation Analysis ...... 127

Table 4. 19: Model Summary ...... 128

Table 4. 20: ANOVA ...... 128

Table 4. 21: Coefficients ...... 128

Table 4. 22: Statements on Consensus Orientation ...... 129 xii

Table 4. 23: Correlation Matrix ...... 130

Table 4. 24: Model Summary ...... 130

Table 4. 25: ANOVA ...... 131

Table 4. 26: Coefficients ...... 131

Table 4. 27: Statements on Stakeholder’s Participation ...... 132

Table 4. 28: Correlation Matrix ...... 133

Table 4. 29: Model Summary ...... 133

Table 4. 30: ANOVA ...... 133

Table 4. 31: Coefficients ...... 134

Table 4. 32: Statements on Political Environment ...... 135

Table 4. 33: Correlation Analysis ...... 136

Table 4. 34: Regression Results for Moderation ...... 138

Table 4. 35: Regression Coefficients to Test for Moderation ...... 139

Table 4. 36: Statement on Financial Perspective ...... 140

Table 4. 37: Statement on Customer Perspective ...... 141

Table 4. 38: Statements on Internal Process Perspective ...... 142

Table 4. 39: Statements on Learning and Growth ...... 142

Table 4. 40: Statement on Social ...... 143

Table 4. 41: Statement on Environment ...... 143

Table 4. 42: Statement on Competitive Advantage ...... 144

Table 4. 43: Respondent’s Opinion on services provided by County Government ...... 144

Table 4. 44: Quality of Services Delivered by the County Government ...... 145

Table 4. 45: Respondent’s opinion on the Process of Delivering Services to Citizens ...... 145

Table 4. 46: Checking for Normality ...... 147

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Table 4. 47: Overall Correlation Analysis ...... 148

Table 4. 48: Model Summary ...... 149

Table 4. 49: ANOVA ...... 149

Table 4. 50: Coefficients ...... 150

Table 4. 51: Model Summary ...... 150

Table 4. 52: ANOVA ...... 151

Table 4. 53: Coefficients ...... 152

Table 4. 54: Collinearity Statistics ...... 152

Table 4. 55: Levene Statistic ...... 153

Table 4. 56: Model Summaryb ...... 153

Table 4. 57: Linearity Test ...... 154

Table 4.58: Results of the Test for Suitability of Structure Detection ...... 155

Table 4. 59: Loadings and Cross-Loadings for the Measurement Model ...... 156

Table 4.60: Convergent Validity ...... 159

Table 4.61: Discriminant Validity ...... 160

Table 4. 62: Chi-square Goodness-of-Fit Test ...... 161

Table 4.63: Model- Fit Indices for the Influence of Borrower Characteristics on Performance of county governments in Kenya ...... 163

Table 4.64: Model Fit Indices for the Influence of Regulatory bodies on Performance of county governments in Kenya ...... 164

Table 4. 65: Models Fit Indices for the Influence of Consensus orientation practices on Performance of county governments in Kenya ...... 166

Table 4.66: Models Fit Indices for the Influence of Stakeholders’ participation on Performance of county governments in Kenya ...... 167

Table 4.67: Model- Fit Indices for the Overall Structural Equation Model ...... 170

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Table 4. 68: Overall T-Statistics Value without Moderation ...... 170

Table 4.69: Model- Fit Indices for the Effect of Moderation on the Relationship between Residential Mortgage Financing Practices and Performance of county governments in Kenya ...... 172

LIST OF FIGURES

Figure 2.1: Stewardship Theory Model ...... 18 Figure 2.2: Agency Theoretical Perspective ...... 23 Figure 2.3: The Stakeholder Model ...... 32 Figure 2.4: Conceptual framework ...... 34 Figure 2.5: Sustainable balance scorecard ...... 45

Figure 4. 1: Scree Plot ...... 116

Figure 4. 2: Age of the respondent ...... 119

Figure 4. 3: Level of Education ...... 122

Figure 4. 4: Normal Q-Q Plot of Performance of County Governments ...... 147

Figure 4.5: CFA Measurement Model for Study Variables ...... 158

Figure 4.6: Significance Test for Inclusiveness of Employees ...... 164

Figure 4.7: Significance Test for Regulatory bodies ...... 165

Figure 4.8: Significance Test for Consensus orientation practices ...... 167

Figure 4.9: Significance Test for Stakeholders’ Participation ...... 169

Figure 4. 10: Structural Equation Model ...... 171

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ABBREVIATIONS AND ACRONYMS

ANOVA: Analysis of Variance

CBK: Central Bank of Kenya

CEC: County Executive Committee

CEOs: Chief Executive Officers

CFA: Component Factor Analysis

CMA: Capital Market Authority

COK: Constitution of Kenya

COs: County Officers

DY: Dycom Industries

FSD: Financial Sector Deepening

GDP: Gross Domestic Product

HFCK: Housing Finance Company of Kenya

IFRS: International Financial Reporting Standards

KCC: Kenya Co - Operative Creameries

KIPPRA: Kenya Institute for Public Policy Research and Analysis

KMO: Kaiser-Meyer-Olkin

KNBS: Kenya National Bureau of Statistics

MCAs: Members of County Assembly

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MSA: Measure of Sampling Adequacy

NACOSTI: National Council for Science, Technology and Innovation

NCST: National Council for Science and Technology

NSE: Nairobi Stock Exchange

OECD: Organisation for Economic Co-operation and Development

PCA: Principle Component

PFM: Personal Financial Management

ROA: Return on Investment

ROE: Return on Equity

RoK: Republic of Kenya

SID: Society for International Development

SPSS: Statistical Package for Social Sciences

TSE: Transaction Cost Economics

UK: United Kingdom

UNDP: United Nations Development Programme

USA: United States of America

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CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

This study aimed to evaluate the effects of corporate governance on performance of county governments in Kenya. In developing countries where there are fewer resources, the governments have a challenge of providing and improving service delivery to their citizens in the most effective and efficient way. To enhance devolution, counties in Kenya have adopted corporate governance practices to ensure public funds are managed with accountability to spur development.

Governance defines roles, responsibilities and accountability within an organization according to Dunphy, Griffiths and Benn (2013). Governance according to Sisulu (2012) is the act of establishing policies, through continuous monitoring of proper implementation, by the executive in power of the governing body of an organization. Corporate governance, according to Mankins and Rogers (2010), is operationalized as the means of human development that is achieved from managing of social and economic resources by empowering others.

In the current political pluralism, corporate governance has been of critical importance (Reenen, 2011). It is an essential and crucial factor that is mainly used in maintenance of an active balance between equality in society and the need for order (Boyd, 2015). Other elements that come handy with corporate governance include: having and maintaining a corporate framework that is well organized that allows citizens to make a contribution and come up with creative means for solving existing challenges, use of power that is accountable and maintaining and protecting human freedom and rights according to the law (Clarkson, 2015).

Good governance has eight elements or characteristics, according to Tauringana and Chamisa (2014). The characteristics include transparency, participation, rule of law, accountability, being responsive, effective and efficient, consensus oriented and inclusiveness. This means that corporate governance should have a regulatory body guided by the rule of law where it has fair legal frameworks that protect stakeholders fully.

Second is transparency, where information is supposed to be provided in easily understandable media forms. The information pertaining to the institution should be directly and freely accessible to those impacted by governance practices and policies.

Third is responsiveness, where governance requires that the organizational design and processes be designed for the best interests of all stakeholders within a manageable timeframe. Consensus orientation is the fourth element. To reach a broad consensus, consultation is required from all the stakeholders. This consensus ensures prudent and sustainability of planned processes within an organisation.

The fifth element is inclusiveness. Institutions that ensure fairness and guide their stakeholders in decision-making have a high chance of maintaining and enhancing effective corporate governance.

The sixth element is effectiveness and efficiency, which is the end result of any organisation’s goal (Karamanou and Vafeas, 2015).

In public sectors or organizations owned by the government, poor governance standards have negatively impacted the economy; a case in point is the financial crisis of the East Asian countries (CMA, 2016). Due to the fact that sole proprietors and the greatest shareholders dominate control in Asia, corporations have a tendency of following the ‘insider’ model (Mankins and Rogers, 2015). For example, in Malaysia and Asian countries, the wearing down of shareholder confidence was found to be one of the main aspects that worsened the financial crisis.

Majority of the analysts, for example Punch (2016); Cubbin and Leech (2016) and; Johnson and Mitton (2013) indicated that the wearing down of shareholder’s confidence in Malaysia was as a result of the state’s poor governance principles and a public funds management 2

policy without transparency. A report by World Bank (2012) shows that the adoption of corporate Governance by Nigeria and Ethiopia became a relevant issue due to its great impact on the growth and development of those countries.

Corporate governance is therefore an important strategic issue for county governments to facilitate their operation, through enabling the Governors to assign all the stakeholders their roles so as to ensure the success of the counties. Counties are devolved systems of governments, which have been established in most countries across the globe (World Bank, 2012). The people are involved directly in governance through transfer of resources and authority form higher to lower levels of the devolution responsibilities by the principles appointed by the people themselves (Ojo, 2013).

Good governance creates the conditions in which managers and service providers are more likely to exercise leadership in health services organization. When managers and service providers are empowered, they deal with change effectively, seek and create opportunities, provide a vision, motivate, inspire, and energize people and develop more leaders like them. Good governance provides purpose, resources, and accountability in support of management, enabling organizations to achieve strategic objectives (Kibua and Mwabu, 2016). One’s ownership, commitment, level of empowerment, power of imitativeness, level of professionalism, motivation levels and morale are what great organizational autonomy is comprised of (Hubbard, Samuel and Heaps, 2014).

Counties have been introduced in developing nations in Africa to ensure that development of the economy is brought closer to the citizens and to ensure they benefit from the government’s services (Walls, Berrone and Phan, 2012). East African counties also help the countries to refrain from misuse of the power and resources by the national government. In countries where devolution has been successful, development has increased as compared with those, which are yet to introduce the county government (Boyd, 2015).

Kenya has not been left behind with the introduction of county governments being achieved after the promulgation of the 2010 constitution in order to keep abreast with other developed countries (CMA, 2016). Kenya has 47 counties, which were agreed upon by the Independent

Electoral and Boundaries Commission (IEBC) as per every region’s population. The Kenyan constitution (2010) under chapter six shows that for effective initiative of corporate governance to be established, there is need to be guided by a well formulated and developed code of best practice for Kenyan corporate governance; Co-ordinate corporate governance developments in Kenya with other East African, African, the Commonwealth and global projects, and also seek ways to come up with a national apex body, which is the foundation in the national corporate sector for the promotion of corporate governance (KIPPRA, 2015). Therefore, the purpose for which these guidelines are formulated are set to serve if every Kenyan corporate entity evaluates the practices that it uses on its governance, otherwise enhances its own governance practices and/or improves what needs to be improved.

The new Kenyan governance system, which is the county government has been empathized and structured to enhance citizen participation in governance (Wafula, 2013). Most of the county governments have facilitated the sharing of vision between people in governance positions and citizens of that particular county (Thompson & Martin, 2015). The county government has improved the societal confidence of many of its citizens that are part of the governance process (RoK, 2015). In the spirit of devolution, the Kenyan constitution (COK 2010) has allocated 25% of the total revenue to the development of the counties, which has been assigned, to the governors who are the county managers (KIPPRA, 2015).

Kenya’s historical over-concentration of power in one center resulted in underdevelopment and marginalization characterized by unequal access to state resources and services by all the regions and communities in Kenya (World Bank, 2015). Through the years, development and access to public services have been mired mainly by poor governance policies manifesting themselves in patronage, accountability in public expenditure, participatory governance, lack of transparency and lack of democratic (Ntoiti, 2013).

To check on manifestations of bad governance, through the Constitutional review process, it was appropriate then for Kenyan to change the design, structure and system of governance from a centralized one to a devolved one, where power and resources are shared between National and County Governments (Finkelstein and Hambrick, 2015). Devolution enhances service delivery and development at the County level by bringing resources close to the

people and enhancing the right to self-governance. Good governance therefore, is recognized as an essential element of devolution (Ahmed, 2016). Kenyans were excited that decentralization of governance from the national level to the County level would lead to good governance through equitable distribution of development projects, opportunities, increased oversight on expenditure and regular public participation in decision making. This was thus aimed to reduce corruption among other factors (Copeland, 2015).

To avoid the mistakes of the past and insulate devolution from bad governance, the Constitution of Kenya 2010 made very elaborate good governance provisions to ensure openness in the running of public affairs relating to accountable exercise of power, separation of powers, integrity, public finance and oversight (KPMG, 2017).

To operationalize them, Parliament enacted several pieces of legislation to give full effect to the Constitutional provisions. The Leadership and Integrity Act 2012, Public Finance Act 2012, Public Officer Ethics Act 2003 and County Government Act 2012 which provide a strong legal framework on good governance in Kenya at the County level (World Bank, 2015). They have specific provisions to ensure inter alia accountability and transparency, high levels of integrity for public officials, consultation and public participation, and institutions and structures to support implementation of decisions.

It is, however, important to note that besides the efforts made to ensure good governance in devolved system of government in Kenya, the system has not identified the necessary factors that promote good governance in the counties. The county governments have continued to experience challenges, which have derailed their public performance and administrative operations (Mwongozo, 2017).

Governance in the counties is based on a comprehensive understanding of the county’s operations (Mankins and Rogers, 2015). This includes having an understanding of responsibilities, roles and clarified accountability. This requires organization-wide knowledge, which is delivered by a business process-based approach (Ntoiti, 2013). The approach to governance provides stakeholders with a clear understanding of the structures thus enhancing a manager’s competent views on how to run the counties. Governance thus

offers an added advantage on employee action, counties accounting variables, impacts of new projects and other important factors.

1.2 Statement of the Problem

Major strategic decisions concerning corporate resources allocation and utilization are the very investments basis that can result in sustainable performance and development (Ngumi, 2016). These strategic decisions regarding corporate governance are inclusiveness, effective regulatory body and consensus orientation, and the extent of stakeholder’s participation in the county’s endeavors (Okwiri, 2016). Okiiya, Kisiangani and Oparanya (2015) posit that for a country to have the capacity to achieve sustainable prosperity, there is need to have measures that will ensure public funds are well managed.

A few studies have been done on corporate governance. A study by Lins and Miller (2014) done in France shows that corporate governance has an effect that is significant to the performance of firms thus affecting organizational service delivery in public institutions. The study, however, did not address the cultural aspects of corporate governance. Mak and Li (2010) study done in Singapore focused more on the influence of culture on organizational corporate governance. According to this research, culture of compliance has a significant influence on corporate governance. Cannella (2014) study in Bosnia and Herzegovina evaluated how practices of corporate governance influenced financial management of listed companies. The study found that stakeholders have a role to enhance corporate governance through building a consensus in favor of fair regulations, the right policy and effective corporate reform.

The reviewed studies did not address the existing link between corporate governance and performance and how corporate governance in Kenya’s county governments affected performance. Performance was found to be affected by corporate governance according to local studies done but their focus was on private firms and public owned corporations. A study by Wafula (2013) established that the local authorities which were in charge of governance at the local level had failed to offer quality services to their citizens since they did not have appropriate consensus orientation practices. The above aspects had a significant

connection with the performance of the county governments. Gitari (2015), using the New KCC as a case study, sought to investigate if there is any association between financial performance and corporate governance. According to the research findings, the Board of KCC made use of inclusiveness of good corporate governance.

These were reviewed and continuously improved, which led to better performance. From the above review, none of the studies evaluate inclusiveness, regulatory bodies, consensus orientation practices and stakeholder participation on performance of county governments in Kenya.

According to Auditor General Report (2016) over Kshs.10 billion cannot be accounted for by the county governments and the same report mentions lack of corporate governance framework as a catalyst that has triggered the vice. A number of the documented evidence include; lack of inclusiveness of employees in policy making of which the policies are adopted as they are from the national government, functions of regulatory bodies are not flexible to the management bodies in the counties, consensus orientation practices to bring all stakeholders on board on the county’s performance are not well stipulated in the counties reducing stakeholders’ participation.

Public funds management is further affected by the political environment where those affiliated to the ruling party seem to be more favoured as compared to those in the opposition (Ndegwa, 2016). This has slowly led to the deterioration of the county performance affecting even the country’s GDP growth index from 7% in 2009 to 5.8% in 2016 (Kihara, 2016). From the foregoing, corporate governance best practices are therefore, important for counties in order to stir the required development standards, which the county managers seem to be having a deficiency in. Besides, there is little, if any, research done on how performance was affected by corporate governance of county governments in Kenya exposing an empirical gap, which this study also aimed to address. The research goal was to fill the current knowledge gaps identified in the performance of county governments.

1.3 Purpose of the Study

The general objective of the study was to evaluate corporate governance and performance of county governments in Kenya

1.4 Specific Objectives

Specifically, the study aimed;

i. To examine the influence of inclusiveness of employees on performance of county governments in Kenya

ii. To evaluate the functions of regulatory bodies on performance of county governments in Kenya iii. To assess the influence of consensus orientation practices on performance of county governments in Kenya

iv. To establish the influence of stakeholders’ participation on performance of county governments in Kenya

v. To investigate the moderating effect of political environment on corporate governance and performance of county governments in Kenya

1.5 Hypotheses

The following null hypotheses guided the study;

Ho1: Inclusiveness of employees has no significant influence on the performance of county governments in Kenya

Ho2: The functions of regulatory bodies’ have no significant influence on performance of county governments in Kenya

Ho3: Consensus orientation practices have no significant influence on performance of county governments in Kenya

Ho4: Stakeholders’ participation has no significant influence on performance of county governments in Kenya

Ho5: Political environment has no moderating effect on corporate governance and performance of county governments in Kenya

1.6 Justification of the Study

This study would be beneficial to the following stakeholders;

1.6.1 Policy Makers

The study would be significant to the policy makers as it would provide them with a platform through which devolution processes can be assessed, and highlighting the areas which have remained a challenge to the new system of governance and how well they can be addressed. Recommendations from the study may provide insights to the Kenyan National Assembly and Senate on areas they can adopt, make Bills, discuss and forward the same to the President for assent so that they can become law that would assist in addressing issues that relate to corporate governance. The study would be of benefit to the county assemblies as the findings may assist in implementing county policies and county regulations targeted to improve the governance of the counties.

1.6.2 County Executives

The county executive has an essential duty in achieving effective corporate governance; hence this study would act as a guide to encourage them to embrace corporate governance practices that help their entities to prosper and get positive returns on their investments. The study would also be a reference material to the executives in establishing clear roles for all players in the corporate governance process.

1.6.3 Members of the Public

This research would provide an early testimony concerning the challenges, if any, making devolution difficult as a result of applied corporate governance. Areas that complement the success of devolution would also be highlighted. Citizens would also use this research to track the development of devolution in their counties and monitor all challenges facing devolution.

1.6.4 Scholars

Devolution is a new concept in Kenya that needs the right structures if smooth transition is to happen from the previous system of governance to the new devolved system. This study would further form basis for further research as would be presented in the sector of suggested section of further research.

1.7 Scope of the Study

The county governments in Kenya’s corporate governance and performance were assessed in this study. The research covered the 47 counties in Kenya and these counties formed the unit of analysis. Sample was the county officials who included Governors, deputy Governors, County ministers, County secretaries, deputy County secretaries and Members of County Assembly (MCAs). The study took a period of 1 year (12 months) in order to collect and compile the needed data from 2017 to 2018.

1.8 Definition of Terms

1.8.1 Consensus orientation practices: Involves dealing with disclosure and authority within the counties. Proper practices allow an organization to decrease the risk of fraudulent exercises, from classifying the main unexplained differences and apprehensive contacts at an earlier point (Kock, Santalo and Diestre, 2012).

1.8.2 Corporate governance: This is the procedure and policy used to manage affairs of the county to develop growth and corporate bookkeeping with the end result of understanding

the nation’s long-term value while the main purpose is to take the best interest of the public (Sisulu, 2012).

1.8.3 County governments: Public administration that is responsible for county legislation. Here is where resources are devolved in order to ensure equity of resources. There are 47 counties according to the 2010 Kenya Constitution (GoK, 2016).

1.8.4 Governance: Defines roles, responsibilities and accountability within an organization. This establishes who is responsible for which decisions and the role county executives play in the process (Dunphy, Griffiths and Benn, 2013).

1.8.5 Performance of county governments: Measure of county progressive development by use of the sustainable balanced scorecard as set by the constitution in order to achieve the set 2030 national goals through devolution (KIPPRA, 2015).

1.8.6 Regulatory body: These are set institutions to counter disagreeing interests of stakeholders in relation to their roles and rights. Rules and regulations are of a specific position for counties with governing or lawful duties and serves as a monitoring system (Parasuraman, A., Zeithaml and Berry, 1994).

1.9 Chapter Summary

Chapter one reviewed corporate governance on performance of county governments by addressing the background of the study so as to bring the reader into perspective. The problems facing counties due to corporate governance has been stated and objectives guiding the study deduced from the current problem. Hypotheses that were tested are presented and the need for the current study justified. Scopes of where the study would cover from time, geographical and methodological scope are highlighted and definition of key terms as presented in the study concludes the chapter.

The next chapter presents a review of the literature that would examine the theoretical, empirical and conceptual framework. Theories that relate to the current study would be

examined in the theoretical framework. Empirical review was also done to identify knowledge gaps on the relationships investigated in the study. Conceptual framework was designed to model the relationships in the study.

Chapter three contains the research methodology where it describes the philosophy of the research where the research was contextualized, research design, population as well as the sampling design. The chapter concludes with how data was collected and analyzed.

Chapter four presents the results and findings. The chapter covers the study results attained from collected data from the field. Results are presented in tables and figures. The tabulation is done and the linkage with the literature review presented.

The last chapter in this study is chapter five. The chapter presents the discussion, conclusions and recommendations as per the findings in chapter four. The study further suggests area for further study as suggested by the researcher from the gaps identified.

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter reviewed studies on inclusiveness, regulatory bodies, consensus orientation practices and stakeholders’ participation on sustainable performance in all sectors and contextualizes to the study area, which is the county governments. It is arranged in four sections which contain the theoretical review where theories that underpin the study are presented, followed by the conceptual framework as drawn from the literature reviewed and then an empirical review section. The chapter summary contains research gaps as drawn from the empirical review.

2.2 Theoretical Review

In this study, four theoretical propositions formed the foundation. They included; stewardship theory, the agency cost theory, transaction cost economics and stakeholder theory, which were linked to the scope and nature of review. The theories shed light on the study done to find out the degree to which corporate governance influences firm performance concentrating mostly on the shareholders’ role and stakeholders’ interests.

Stewardship theory places limits on maximizing an institution’s process analyzing the upside of the relationship and thus focused on inclusiveness of employees on the performance of county governments, which is the first objective.

Agency theory focuses on the regulatory body by assessing the upside potential of an organization and was linked to the second objective which is regulatory bodies influence on the performance of county governments. The third objective which is consensus orientation emphasizes on ensuring rules are implemented at whatever cost and minimizing its downside, while Stakeholder’s theory focuses on specific involvement of an institution’s officials, shareholders where applicable, and the beneficiaries who include the members of

the public thus linked with the fourth objective which is stakeholder’s participation on performance. Details on these theories are as illustrated below: -

2.2.1 Stewardship Theory

Davis, Schoorman and Donaldson first advanced the theory of stewardship in 1991 (Caplan, 2014). They argued that a steward’s main duty is shareholders’ wealth protection as well as maximizing via the performance of public institutions, since only then can the steward’s utility functions be maximized. This view therefore treats the public entities managers like stewards functioning on behalf of the government and should therefore always seek to ensure that the institutions perform as they are intended to for the interest of the public. The theory obtains that stewards as such can only derive their satisfaction and motivation from the achievement of the county governments (Mwirichia, 2013). This theory is therefore built on the knowledge that it is important to put in place structures that vest a lot of power on the steward while at the same time giving him/her maximum autonomy derived from trust. It emphasizes that employees or executives must always act independently in order to ensure the desired public trust and performance.

The basics of stewardship theory are borrowed from psychology, which centers on the conduct of administrators (Ho, 2015). The steward's conduct is expected to be in favor of the institutions entrusted to them, and the public enjoys from their self-serving conduct and the steward's conduct won't deviate from the concerns of the public needs given that he tries to achieve the goals of the institution entrusted to them. Where public wealth is boosted, the steward's utilities likewise gets augmented since the institution’s achievement will cater for most prerequisites and the role of the stewards will be in the open. Stewards adjust pressures between the various recipients and the members of the public. Subsequently, the theory is a contention advanced in the performance of the public entities that fulfills the prerequisites of the invested government resources bringing about dynamic performance, which results in better administration (Kapopoulos and Lazaretou, 2011). On the other hand, it is also upon the members of county assemblies to shield their name as the people who make decisions in county government. They therefore are obliged to operate in such a way that the public coffers from both the national and county are well utilized (Labie and Périlleux, 2008). Only

in this way, is it possible for the county’s performance to have a direct effect on the perceptions of the public needs. Executives also have a duty to manage their careers, as they need to not only be but also seen to be effective stewards of public funds. Another school of thought held by Kapopoulos and Lazaretou (2011) however insists that stewards usually return benefits to the government entities so they can create a favorable name that will aid their re-entry into the market in future in benefit of the careers.

According to the theory, the government institutions’ management acts as the stewards for the public and in the greatest wellbeing of the principals (Abdullahi, 2000). The ideal of man in stewardship theory is established on the fact that the management decides on the wellbeing of the public, ensuring that collectivist choices are put above own choices. Doing the right thing for the public encourages these types of people, as they believe that they will benefit in the end when the public needs are satisfied.

The management done by the steward increases the public organization performance that works under the principle that the principal and the steward will benefit from a well-founded organization. In comparison to the panels in place with the agency theory, the mode of stewardship suggests that information held by the steward and controlled by the principal, ensures that the organization’s decisions are well made and the tools of power well utilized. Thus, the principal allows the steward to perform in the public’s best interest, believing that the steward will make decisions that ensure lasting performance for the public organization. Actually, putting up control measures on stewards will demoralize them and decrease productivity for the interest of the public (Tan, 2012).

An association's culture is frequently determined by its leaders (Otiti, 2010). Articulations of profound quality and dependable activities by workers are most of the time treated as outcomes of stewardship conduct by government administrators. Regularly, the good and reliable way in which a public management acts prompts them as having a reputation for genuineness and honesty with the members of the public (Farrar, 2008). Administrators that act as stewards are trusted by government as well as the public. In this way, steward-like conduct by directors at the county management positions of the association frequently

advances positive public citizenship practices all through the government positions. Like depictions of public organizations stewards and their practices, stewardship is portrayed as biased towards social, collectivist, agreeable, public environments, which inspire workers who put their trust in the entity. Workers commonly rely on each other yet still self- governing, firmly relate with the public organization, and regularly make contributions that largely advantage all.

Stewardship practices that are cherished and carried out inside public organizations encourage workers to oversee inner and outer associations with long-term orientations (Lipton and Lorsch, 2015). This enables public organizations to center upon the improvement of their core services to additionally extend the public-particular favorable circumstances in enhancing performance in the public projects. This prompts the advancement of competitive advantage through inside and outside organizational connections in view of shared trust. High stewardship societies can create advantages in view of vital adaptability to create advantages and endeavor public-specific focal points that enhance the desired performance (Siha, 2013).

Key results of firms with such cultures include having better workforce practices, public inclusiveness, public interest as per the finances budgeted, less disconnected acquisitions, and less risky ventures guided by a stewardship culture (Oman, Fries and Buiter, 2014). The long-term results of public entities with such cultures include bringing about increate public project performance; higher interest in activities, and little, long-term service provider arrangements. Such exercises are believed to prompt greater amounts of long-term value for the organization. Additionally, theory improvement recommends that steward-like conduct is fundamental for proficiency and overall productivity in a financial performance framework. These practices can add to an association's advantage over management within counties aimed at enhancing the public wellbeing.

According to Donaldson and Kay (2006) stewardship theory focuses on self-serving intentions and the self-intrigues of managers in charge of organizations. What drives execution here is not the adjusted avarice of the managers but rather their own relationship

with the points and motivations behind the association while in the process of inclusiveness in achieving a desired objective. Stewardship theory negates the presumption that a manager’s thought processes are against those of the stakeholders; both have an enthusiasm for expanding the long-haul stewardship of an organization and are subsequently effectively all round adjusted. The stewardship view of strategy is an important model of inclusiveness process within an organization in order to bring the desired performance by integrating the resource-based view, market-based view, and socio-political level processes (Cheng and Nagarajan, 2008).

Pound (2011) well described some aspects that define the management value of stewardship that is; enhancing performance, trust amongst each other, open communication, enablement and long-term coordination. Weir, Laing and McKnight (2012) argued that the measurements of open communication, and enablement on high obligated firms. The aspect of trust is important in creating the type of connection needed to make stewardship work (Gregory, Rutherford, Oswald and Gardiner, 2012; Wild, 2012).

Stewardship theory emanated from Morck, Shleifer and Vishny (2015) as presented in figure 2.1 whereby the management acts as the stewards for the public institutions and in the greatest wellbeing of the principals. The ideal of man in stewardship theory is established on the notion that the management decides on the wellbeing of the public organization, ensuring that collectivist choices are put above own choices. This type of people are encouraged by doing the right thing for the public, as they believe that they will benefit at the end when the community succeeds. The steward management increases the organization’s performance that works under the principle that the principals will benefit from well-founded public entities (Leuz, Lins and Warnock, 2010). In comparison with the panels in place with the agency theory, the principal who supports stewardship theory will encourage the steward who holds information, the tools and the power to ensure great decisions are made for the organization (Khan and Awan, 2012). Thus the principal allows the steward to perform in the best interest of the public, believing that the steward will make decisions that ensure performance of the public organizations bestowed on them. Actually, putting up control measures on stewards will greatly de-moralize the steward and lead to decreased production

to the organization (Jose, Lancaster and Stevens, 2014). The figure below presents the stewardship theory model, which shows the relationship between the principals and managers choices: -

Figure 2.1: Stewardship Theory Model

Source: Weir et al., (2012)

Stewardship theory allows the steward to perform in the public’s best interest, believing that the steward will make decisions that ensure lasting performance for the public organization. The parts it recommends ought to stay public ensuring that the results of securing secure a key part of performance as a result of entrusted trust by the county managers; the quality and power of official authority. Apparently, the essential commitment of stewardship theory is on its scrutinizing of public sector hypotheses' cynical presumptions about human instinct.

Like Jiraporn, Singh and Lee (2014) differentiation between hypothesis X and hypothesis Y supervisors, it recommends that the issue of administration may not be in the self-enthusiasm of the official but in the suppositions that removed others. The risk it highlights is that negative speculator suspicions may unintentionally bend or debilitate the administration of an

organization. Hambrick and Finkelstein (2014) critiques stewardship theory for assuming that stakeholders’ best needs can be conceded or balanced on one another in the implementing stage of corporate governance. As argued by Klein (2016), this is a result of its stress on mediation as the main kind of sustainable performance for tackling conflict on shareholders’ interests. Miller-Millesen (2013) suggested dialogue as a substitute and this led him to protect ‘patriotic’ fact of the corporation as a substitute to that connected with the theory of stewardship.

Hillman and Daniel (2012) state that stewardship require management and employees of any institution to be responsible over the results that come out from the organization’s efforts and projects without trying to control the employees or try to be mindful of them. The best method to take this step is to ensure that powers and privileges are redistributed as required, choices and resources are moved to all corners of the organization through effective inclusiveness. Cascio, (2014) posits that a team leader willing to adopt stewardship theory should be willing to say that though he/she may not know what is best for every employee and to ask them what they think and listen to what they have to say. This inclusiveness is key to ensuring counties are governed as desired and performance is achieved. This argument thus brings our first hypotheses test that is inclusiveness of employees has no significant influence on the performance of county governments in Kenya.

2.2.2 The Agency Cost Theory

The second theory that underpinned the study was Agency Cost Theory. This theory supports the second objective, which is regulatory body influence on performance. Jensen and Meckling propounded the agency cost theory in 1976 (Alchian and Demsetz, 2002). Agency theory deals with the association amongst the public and the county management acting as their representatives. The major concern of this theory is whether it is practically possible to institute measures in the public sector that would ensure managers take actions that would result in maximization of benefits for the public of especially in cases where there is a demarcation between the public and public sector managers. The agency cost theory views the county government as a governance structure and a nexus of contracts. According to the theory, the government institutions management acts as the agencies for the public and in the

greatest wellbeing of the principals (Turnbull, 2014). The ideal of man in agency cost theory is established on the fact that the management decides on the wellbeing of the public, ensuring that collectivist choices are put above own choices. Doing the right thing for the public encourages these types of people, as they believe that they will benefit at the end when the public’s needs are satisfied. This theory emphasizes on ensuring that resources are distributed to the people fairly through formation of a public organization, which ensures that resources are directed through specific marketing costs by the county government.

The theory postulates that a principal (P) allots another person referred to as agent (A) to act on his behalf that is to transact and decide on his behalf in order to ensure that P’s utility preferences have been maximized. In this sense problems are bound to arise if: P and A’s goals are different, P and A employ different measures in the evaluation of the performance of A, P and A have conflicting set of data regarding managerial decisions to be made by A while representing the interests of P; or P and A have diverse risk aversion degrees (Cascio, 2014).

The theory postulates that a principal allows another person referred to as agent to act on his behalf; that is to transact and decide on his behalf in order to ensure that principal's utility preferences have been maximized (Klapper and Love, 2014). In this sense, problems are bound to arise if: Principal and agent have varied goals; principal and agent employ different measures in the evaluation of agent's performance; principal and agent have conflicting sets of information regarding managerial decisions to be made by Agent while representing the interests of the principal; or principal and agent have diverse degrees of risk aversion. The most prominent agency problem is the inability of the principals to keep an eye on the agents, perfectly or without additional costs (Jensen, 2013).

Hanousek and Svejnar (2014) portrayed this issue as a contention that happens when somebody controls assets that are not owned by him and are meant for the public. The concern was addressed and extended to public organizations with their detachment of possession from control. In 1976, this seemingly irreconcilable situation amongst investors and administrators was named the principal-agent challenge, viewing it as the reason for the

supposed agency costs (Ingley and Walt, 2013). The issue happens if a principal hires an agent to follow up on his interest, the two parties being both rational and having personal welfares. Usually and with regard to public entities, the principal-agent issue portrays the concern between county directors (agents) and members of the public (principals). This may however extend to other numerous different circumstances.

Managers ordinarily access more data about the public organizations’ condition and its day- to-day transactions than shareholders do (Mullins, 2015). This advantage of access to information enables them to embrace optional spending. Moreover, members of the public regularly don't close the asymmetry, in light of the fact that the access to information and keeping up to date with the happenings in the how the county is governed may at times be expensive.

Moreover, such information would still be accessible even to those interested in county operations. In such conditions, monitoring would be open and beneficial to all and the effort directed towards it optimal. Such conflicting interests become more pronounced since it depends with how finances are used which may vary depending with what the public expect vs. how the finances are managed (Barcan, 2013).

If there are audits done and it is found that there are contradicting figures between the expected, which is budgeted, and the output, which is lower than the public expectation, then there arises some questions that may result in corruption (Berghe and Levrau, 2014). This therefore means that the managers are financially less committed to the public affairs, this problem of conflicts can only get worse. Furthermore, the managers are typically more risk- averse than public itself, which additionally presents a case of misaligned interests. While the public raises concerns with the oversight bodies over various speculations, then however professional the managers are may lose their jobs if ventures fall short of expectations. Administrative activities of the managers that decrease the benefits attributable to the public are complex, some more evident than others (Mallette and Fowler, 2012). Managers can seize cash, for example, by pitching public resources for their own particular organizations at a lower cost (Sun and Kirkbride, 2014). Other private advantages include the utilization of

perquisites. This may be in form of expensive offices at the workplace, expensive vehicles or expensive trips. Agency theory recognizes and offers an array of plans that can be used by the public stakeholder to safeguard taxpayers and public investments from the self-interested motivations of those in charge with management of the institutions appointed to hold. Fraser, Zhang and Derashid (2010) assert that to have checks and balances there must be rules that govern the institution in order to achieve its mandate. Designed managerial benefit agreements, control of the management, the board and also public project control are some of the examples. The main traits of a successful corporate governance structure acknowledged by Lev and Sunder (2012) are possession, boards of directors, CEO and compensation of directors, reviewing and statistics and the market for corporates. Organizations need to embrace the code of model governance (rules and regulations) and emphasize the advantages of these control strategies (Lipczynski and Wilson, 2011).

According to Ebaid (2011), in order for the regulatory body to ensure the implementation of rules there will be need to bring about “organization costs,” costs that emerge from the need of making motivating forces that adjust the interests of the county official with those of the stakeholders and expenses brought about by the need of observing official directly to keep them from mishandling public interests. Note that office hypothesis is deductive in its procedure. Here it is crucial to recognize outside, performance-based administration instruments and rules implementation methods. First on the list is performance for public interest, which is the ability of takeovers to teach administrators by giving an instrument, whereby ineffectual official groups can be dislodged by more viable official groups.

The second – “the administrative work showcase” works at an individual level; poor official execution will undermine an individual’s future public interest while great execution will have positive reputational and henceforth vocation improving impacts. Choi, Park and Yoo (2014) depict that the performance of the public sector is considered by the difference of possession and power, and to categorize the aspects that assist this existence.

This study is concerned with the regulatory bodies that govern the public sector in which important decision making by the public entrusted officials ensure it comes at a cost in the implementation process and was supported by Cascio (2014) model shown in figure 2.2.

Principal Agency relationship Agent

Regulatory body

Contract

Imperfect Contract Perfect Contract

Agency Not Attainable in Costs Practice

Governance Bonding Costs Residual Agency Costs Mechanisms

Figure 2.2: Agency Theoretical Perspective

Source: Cascio (2014)

According to the model, the agency link between principals (public) and agents (public entity managers) is dissatisfied by conflict. The agency challenge comes mainly from the public yearning to ensure the regulatory body implements the rules, which are cost demanding. To some extent the funds management objective may not be achieved as a result of self- interested agents attempting to expropriate funds, which is against the set rules (Fan, Wei and

Xu, 2011). Agreements mostly deal with this misalignment of interest. In an intricate public entity condition, agreements are not properly achieved due to covering up of inevitabilities. So as to control and operate outside management systems, the inward and outward systems normally rely upon standards when they fail to attain public satisfaction. The main strategies that lead to rise of organizational costs are upholding and composing of contracts together with public management operations. Additionally, the characteristic loss arising from the operator does not contribute to add stakeholders’ public wealth but increases the cost of agency (Gertner and Kaplan, 2010).

The relationship between the administration and the beneficiaries is characterized by the principals’ connection with the specialists to perform benefits for their sake (Sun and Cahan, 2015). As connected to public administration, the theory recommends a basic issue for missing or far off public administrators/stakeholders who utilize proficient administrators to follow up for their benefit. The root suspicion educating this theory is that the operator is probably going to act naturally intrigued and crafty. This raises hopes that the public official, as the operator, will take care of their own advantages as opposed to those of the administrator central (Ward, 2015).

Agency costs for corporate governance incorporate checking consumptions which include; reviewing, planning, control and remuneration structures, holding uses by the specialist and remaining misfortune because of difference of interests between the vital and the specialist, leftover misfortune because of uniqueness of interests between the principal and the agent (Xu and Wang, 2014). Usually, tax paid by members of the public (principal) reflects such agency costs.

To ensure sustainable performance of the counties, one must therefore maximize on agency costs. Kearney (2012) asserts that corporate governance is the only promising solution to mitigate the agency problem and increase the efficiency of the county operations and expand the chances of economic advancement without rules to govern the operation of the counties. No nation can create employment or wealth if it does not have a proper regulatory body to govern tax expenditures, and in such scenario, counties will stagnate and collapse. If counties

will not achieve the desired goals of devolution, economic growth will not be achievable; employment, taxes will not be paid and there will be zero development in the country. Counties therefore need well-governed and well implementation of the set rules through the Constitution to attract investments, and create jobs for the public. A good regulatory body is thus seen as a prerequisite for national economic development.

Scholars who adopted this theory in their research present a similar point of view that is corporate governance centered on the immediate link that exists between funds management and governance though the discoveries are varied. Johnson and Mitton (2013) found there exists a positive connection between regulatory body and corporate governance through the agency cost principle, whereas Yawson (2016) analyzed the endogenous connections between corporate governance guidelines and funds management and found a slight connection between the two. Chen and Jaggi (2014) found the corporate governance standards and funds management relationship to be low and this raised questions regarding the clear legitimacy of agency theory.

Nenova (2013) indicates that reviews have neglected to locate any persuading association between the principles in corporate governance and county government performance. The above studies proposed that it is essential to test the informative estimation of option ideal models to the organization-based models. Kim (2010) recommended that so as to see the impact of a regulatory body on funds management it is important to analyze the association components like culture, which may have an intervening impact. To date, such studies have demonstrated altogether obscure regarding the relationship between great rules administration, agency cost and public institution performance (Padgett and Shabbir, 2016). As reviewed and critiqued by Mitchell (2014), agency theory has been profoundly compelled in molding the change of corporate administration frameworks. Agency theory subsequently gives a hypothetical foundation to corporate governance tools and perhaps discloses the balanced connections that exist between the development of corporate governance and public sector performance, which indicates that there is weakness in its engagement level of legitimacy when agency cost is barred. This results from the many government strategies by county or public entities operations, and in addition the theory of organization does not

clearly shed light to the relations that exist between corporate governance systems and sustainable performance (Shleifer and Vishny, 2015). Agency cost theory was relevant for this study as corporate governance and socially responsible management decisions advocate for ethics in management and decision-making where higher risks, such as increased litigation and regulation must be reduced. As a tool for the development of a positive finance theory of public organizations, agency cost theory was important as it helped in generating how individuals behave towards their governance and how they respond to the activities they are invited and required to participate in in the structure of public organizations in this case that of the county governments. The significance of the agency cost theory in this study was that it highlighted the key issues that guide management decisions in the county governments. This study thus tested the second hypothesis (Ho2: Regulatory body has no significant influence on performance of county governments) to ascertain whether the same findings apply in the public sector with special focus on county governments.

2.2.3 Transaction Cost Economics Theory

Consensus orientation practices which is the third variable of the study objective was linked to transaction cost theory of economics. This theory was advanced by Williamson (1988) and recognizes the need to govern exchange agreements given that transaction costs are positive, the forms of governance depends on the transactions to be organized (Ellstrand, 2016).

Transaction costs are seen to be positive since individuals cannot effectively and adequately plan for the future as they have limited requisite knowledge for accurate predictions. Equally, it is difficult to engage them in a public project contracts to talk about their plans since they can hardly agree on a mutual understanding on the states of the world anticipated as each party has little prior experience. Further, it is frequently difficult for contracting parties to define their plans in a manner that an unfamiliar third party such as a court could have the ability to enforce them. This makes all public contracts to be actually and effectively incomplete thus attracting positive transaction costs (Sonnenfeld, 2012). The transaction cost economic theory identifies that there is a cost attributed to anticipating all the different contingencies that can come up in the course of the contractual relationship and imagining ways of dealing with them (Byström, 2012). Similarly, there is the cost of negotiating with

others concerning the plans and ultimately there is the cost of putting to paper the plans such that they are enforceable by a third party. The presence of these transaction costs limits the ability of the parties to write complete contracts.

In the presence of incomplete contracts and agency problems structures are put in place so that there is a mechanism for arriving at decisions that are not necessarily included in the original contract. These structures are used to allocate lasting rights to control the government non-human assets. Governance structures are thus used to minimize the agency cost resulting from incomplete contracts (Ross, 2015).

The theory suggests that use of technology is predominantly driven by the public need to reduce transaction cost (Villalonga and Amit, 2010). Therefore, the reduction in transaction cost further stimulates the ripple effect of adopting a given digital strategy recognized in terms of improved service like the adopted Integrated Financial Management System (IFMIS) system in the control of government finances use. The motive of adopting digital strategy is to reduce the transaction cost and therefore the theory explains that when well executed, digital strategy enhances efficiency. Transaction cost theory explains the public financial expenditure decisions, considering the relative merits of conducting intra public transactions in contrast to government to county transactions (Stulz, 2015).

Transaction cost theory assumes that county governments always try to limit their expenses of transacting assets with the environment, and that they attempt to scale down the bureaucratic expenses of expenditure on public projects (Khanna and Palepu, 2015). The theory treats institutions and the adopted IFMIS systems as types of sorting out and planning monetary exchanges. If transaction costs are more than the public needs and internal bureaucratic costs, the public entity develops, as long as the organization is able to perform all its functions at a lower cost, than if such functions were performed by the national government. But, if such expenses for public expenditure are more, then the national government will pull back and source for other sources of financing. This is usually the rationale behind the adoption of online strategies where the online service provider bears some the costs that would have been borne by the county managers and ensure the public’s

needs are met (Weir and Laing, 2010). Tariff (2012) demonstrates that TCE can be connected to the investigation of public administration. Curiously, this approach looks at singular ventures and differentiates them with regard to their asset specificity attributes. In this association, cases of non-particular resources for the most part allude to redeploy able ventures, for example, investing in general purpose and public projects. Then again, cases of particular resources typically comprise of non-redeployable undertakings (Koh, 2015). In relation to this perspective, debt is much the same as public projects needs in that it is the best way to back ventures in terms of costs, especially that which include non-particular resources, and value is like the cross breed in that it is most conservative for speculations that involve particular resources. In this application, nevertheless, the various leveled method of association drops out due to the fact that the county government can’t possess its own finances according to the deficits identified.

To empower the contention, it is accepted at first that ventures must be financed with debt, an administrative structure that works predominantly out of rules (Haniffa and Hudaib, 2015). As indicated by such principles, inability to make arranged installments brings about bankruptcy, where debt holders can reclaim their assets in extent to the degree that the public assets being referred to are redeployable. Since debt holders can expect that the qualities that they would have the capacity to recoup in case of liquidation decrease as the public assets turn out to be less redeployable, TCE predicts that the terms of such financing are balanced on a need basis (Harris and Raviv, 2016)

The critics of TCE contend that remedies from this model are probably going to be wrong as well as hazardous for corporate administrators due to the assumptions and rationale on which it is based. Associations are not insignificant substitutes for organizing efficient transactions when the budget given to the county falls short; they have favorable circumstances for administering certain sorts of monetary exercises through a rationale that is altogether different from that the finances the national government can offer. Despite the fact that persuading in its present plan, the TCE theory needs to incorporate extra hypothetical treatment in regards to the capacity of administration to dig in itself in charge (Serrasqueiro and Nunes, 2008). Specifically, it is imperative for the theory to reassess the effect of

antitakeover arrangements on the adequacy of the consensus orientation practices in details in relation to corporate controller in compelling overinvestment. Furthermore, an analysis of the influence of the corporate governance as a practice is currently lacking and should be addressed. In equity’s case, an analysis of bilateral dependency openly needs an additional examination of the forces needed (Hambrick and D ‘Aveni, 2015). For instance, if it is seen that public organization performance does not depend on corporate governance performance, it is important that further research is done to get insights into the practices that lead to such an outcome.

Finally, the TCE does not look like considering the option that, because to some extent, the public sector performance may not be achieved if the set corporate practice conflicts with the county operation policy guidelines. This thus leads to the test of the third hypothesis: Ho3: Consensus orientation practices have no significance influence on performance of county governments.

2.2.4 Stakeholder Theory

Stakeholder theory was applied to tie with the fourth objective, which is stakeholder participation. Edward Freeman put the stakeholder theory forward in 1983. The theory is biased towards corporate management and business ethics that address moral issues in the management of firms (Hillman and Daniel, 2012). The stakeholder theory identifies and creates groups referred to as the stakeholders of an organization describing and recommending ways in which administrators can recognize and be guided by the interests of concerned groups.

It caters for the internal and external stakeholders of the organization. Internal includes the employees, managers and owners of the organization, whereas the external stakeholders include society at large, government, creditors, stakeholders, suppliers and customers, trade associations and competitors. The theory clearly defines the specific stakeholders examining the conditions under which managers treat the parties in today’s dynamic organizational environment (Gregory, 2012). The major critique of this theory is the application of concepts borrowed from the political circumstances with regard to social contract and applying it to

business ventures. Stakeholder theory is deemed to undermine the principles that establish and maintain market economy. It has succeeded in becoming famous beyond the business ethics fields (Jensen, 2013).

The stakeholder theory currently is being pursued and uses strategic management to ensure that the strategies of the organization are achieved as per the planned strategies objectives (Klapper and Love, 2014). Stakeholder theory has succeeded in challenging the usual analysis frameworks such as management and human resource by ensuring that stakeholders’ needs are at the heart of any move.

The application of theory into public sector improves organizations performance on bureaucratic activities eliminating and replacing modern systems such as the ISO standard Quality Management systems, well monitored, documented and controlled audits for the continuous improvement in quality of services rendered achieving customer’s satisfaction and performance in the organization (Ingley and Walt, 2012).

The shareholder point of view has its underlying foundations in the law of private property rights, which is the establishment of free enterprise (Gürsoy and Aydogan, 2012). The customary knowledge is that private possession is key to social request and monetary proficiency. The shareholders’ interests are expected to be obliged by the enterprise as an expansion that is legitimate according to this outlook. The use of free markets, effectiveness in finances and implication of profits have been advocated in the past decade as a way shareholders use to deal with their properties and the company (Owusu-Ansah, 2015). There is guarantee in financial exercises when private property is possessed by individuals to seek after their own self-interest.

The value of shareholders should be raised through expansion of benefits which they claim as this is the logic augmentation that partnerships should ensure (Cascio, 2014). Every organization should ensure that it delivers its products and services according to its policy and they should be according to the market rule as shareholder benefits need to also be created. Stakeholders, according to the stakeholder theory, do not essentially own the business enterprise, as it does not support this factor. All the workers, clients, providers, and

the locals should be served equally by the enterprise either singularly or collectively. The principle of free market is greatly upheld by the shareholder theory together with issues concerning free riders, moral dangers, and imposing business model power, which the government comes to support, the free market factor at large (Lev and Sunder, 2012).

In the stakeholder perspective, partnerships cannot advance the shareholders’ interests to the detriment of the different stakeholders since doing so is neither good nor financially efficient. Henceforth, the cases of clients, providers, representatives, and local groups must be considered. However, as a rule they might be subordinated to the cases of shareholders.

Freeman (1984) is also a supporter of the stakeholder theory; he recognized the perception of developing stakeholders as an essential aspect if the firm is to continue being profitable. He also makes recommendations on the importance of a supervisor-worker relationship and also illustrates on different groups of stakeholders. Hillman and Daniel (2012) indicated that for a firm to be more powerful, it needs to focus on all factors for example motivation, not only those that affect or influence the profitability of an organization. Therefore, the aspect of stakeholder means that it is an even minded idea. This therefore indicates that a successful firm, apart from the aspect of motivation needs to focus on all relationships that are important to the firm (Gregory, 2012).

Stakeholder theory provides a strategy that decides the plan and system of operations around the firm that are effective to the members who contribute their ideas once in a while (Holderness, 2014). Kocenda and Svejnar (2014) also propose that stakeholder theory efforts to look at the topic of which groups of stakeholders are successful and need the consideration of the administration. Edwards and Weichenrieder (2010) provided a diagram that represents the stakeholder model, as presented in Figure 2.3. This diagram clearly shows the groups interested with the organization. This model explained that all groups that had genuine interests of the organization to attain profitability and that there was no means that any of the individual or group was advantaged over the other.

Governments Investors Political Groups

Suppliers INSTITUTION Exporters

Trade Communities Associations Employees

Figure 2.3: The Stakeholder Model Source: Donaldson and Preston (1995: 69)

Studies done on stakeholders’ participation on performance show mixed results. A study by Erkens, Hung and Matos (2012) shows that, devolution, as a type of administration could be viewed as a method through which governments can give quality administrations that native's esteem; for increasing administrative self-governance, especially by diminishing focal regulatory controls; for making responsiveness to competition and liberality all this is enhanced through the stakeholders’ participation. Florackis, Kostakis and Ozkan (2015) application of the theory shows that it is generally a basic instrument of management. The study findings showed that the main attributes that defined government project stakeholders were power, legitimacy and urgency. A study by Kirkpatrick, Parker and Zhang (2015) argued that if the moral interests of stakeholders were to be legally served, power and urgency must be attended to by the managers. An application was carried out of Nicholson and Kiel’s study of (2011) on stakeholder theory that much work had been on identifying the major influence of stakeholders in a firm as they influence performance among the key stakeholders where government officials and the members of the public audited government- funded projects. Nevertheless, Himmelberg, Hubbard and Palia (2011) posit that there was rejection of null hypothesis where the stakeholder’s model and theory was applied in the study by measuring stakeholder’s participation as a factor under corporate governance.

Moreover, the authors contend that experimental proof supporting the relationship present between stakeholder theory and the performance of the organization is inadequate.

The performance of a firm and the role that stakeholders play in public institutions has been slightly examined. The factor of who is involved is viewed as performance of county has gotten little consideration but then, especially developing country’s public sector most especially in Kenya. Thus, the forth-null hypothesis, which was tested, which was political environment has no moderating effect on Kenya’s county governments and how corporate governance affects their performance.

2.3 Conceptual Framework

Figure 2.4, which is this study’s conceptual framework, shows the relations between variables. This framework attempts to examine and explain factors that affect and hence influence performance of county governments in Kenya. These factors are derived from corporate governance and include inclusiveness, regulatory body, consensus orientation practices and stakeholders’ participation in the county governments. These influence county operations and service delivery.

In this case, manipulation of any independent variable is expected to affect performance of county governments either positively or negatively. Political environment moderates the influence of corporate governance and performance of county governments. Policies made by government such as control of revenue, planning and development taxation, land policies and investment policies directly affect the county government’s performance through corporate governance. How the dependent variable was affected by the independent variables was determined in this research whose main aim was to find out how Kenya’s county governments’ performance was influenced by corporate governance.

Ho1: Inclusiveness of employees

Ho2: Regulatory bodies functions

Ho5 Performance of county Ho3: Consensus orientation governments practices

Ho4: Stakeholder’s participation Political environment

Independent Variables Intervening Variable Dependent Variable

Figure 2.4: Conceptual framework Source: Adopted and modified from McKinsey and Company (2000)

Variables are further operationalized in below;

Inclusiveness of Political environment Performance of county employees governments • Control of • Responsibilities revenue, planning (Using sustainable assigned and development balanced score card) • Structures set etc. • Team work • Financial Regulatory bodies perspective functions • Customer perspective • Internal process • Ethics H H3 implementation perspective • Protection of • Learning and stakeholders’ growth rights • Social and • Communication environmental procedures

Consensus oriented practices

• Skills and competencies • Fairness • Public disclosure & Transparency Stakeholder’s participation

• Mechanism and Control • Oversight functions • Project identification, M & E

Independent Variables Interning Variable Dependent Variable Source: Researcher (2018)

According to figure 2.4, corporate governance is founded on four basic attitudes that include; inclusiveness process, regulatory body functions, consensus orientation practices and stakeholders’ participation. These aspects and how they link to each other is discussed in the subsequent sub-sections;

2.3.1 Inclusiveness

According to Tehranian (2012), the first column of corporate governance, which pertains inclusiveness, is a process and ought to be controlled to make sure suitable and correct revelation of information to the stakeholders which creates one of the measures of good governance in everyday business environment. This can be attained by; allocated duties, set policies and the discipline of the management. The role of making the reports is left for the administration, who later presents them to the Board of Directors, information in the event of the county to the national government. They must take to account the role and signify the company effectively (French and Poterba, 2011).

Inclusiveness in corporate governance adds value to the development and economic balance by strengthening market confidence, economic market reliability and financial effectiveness (Huse, 2010). Therefore, corporate governance hands out the roles and rights of the many members in an organization who are made up of the board, managers, stakeholders and the shareholders. It also makes sure that regulations and strategies for decision-making involving corporate issues are well understood (Lasfer, 2016). The process of corporate governance is reflected as an inside way of inspecting the administration. Good corporate governance is also an efficient instrument that a company uses to reach best performance (Monks, 2016).

2.3.2 Regulatory Bodies

Fischer (2016) asserts that regulatory bodies envelop the structure of rules, procedures, frameworks and connections inside, and through which trustee expert is performed and controlled in companies. Regulatory bodies guaranteed pertinent guidelines are actualized, which incorporate rules that everyone must follow and in addition interior principles of a corporation. Connections are those between related people, the most critical of which are the

proprietors, supervisors, managers of the board, administrative specialists and to a lesser degree representatives and the group at large. Systems and processes management matters; for example appointment of specialist, budget management measures, confirmation systems, revealing necessities and accountabilities (Westphal and Zajac, 2015).

Mak and Li (2010) posit that every institution needs to have effective regulatory bodies governing the procedures of operations, which is the guiding principle that is attributed to the organization’s success. The primary role of a regulatory body is to provide entrepreneurial authority for the company using reasonable and viable controls and structures that allow the oversight and evaluation of risks. Principles that are the public organization important points enable vital departments such as finance and human resource meet their goals and audit administration of funds management. The set rules also set the organizations’ values and standards and allow the public organization obligations to its stakeholders to be understood and achieved. Each of the directors must make decisions directed by the set rules objectively in the interests of the organization (Lewis, 2014).

2.3.3 Consensus Orientation

According to Ingley and Walt (2012) consensus orientation practices are concerned with the obligations and duties of an organization’s top managerial staff to effectively govern the public organization, and the connection they have with the shareholders and all groups of stakeholders. It is additionally characterized as a procedure where the shareholders convince the administration to work to their greatest benefit, providing a notion of speculation certainty that is important to ensure the adequacy of the capital market (Boeker, 2014).

Generally, consensus orientation practices are said to own critical ramifications for the development goals of every public organization on the grounds that appropriate corporate governance rehearses decrease chance for public socio-economic development and growth specialists, pull in speculation capital and enhance performance of organizations.

According to Gabrielsson (2011), by ensuring guaranteed corporate responsibility, ensuring that management information is well upgraded and continuous upgrading of products in

capital markets are the best ways to ensure effective practices of good corporate governance. There is no internationally acknowledged arrangement of corporate governance rules that is connected to board sizes as they rely on commercial rehearses and the legitimate, administrative and financial condition. Though, the Salkind (2015) considered consensus orientation practices in corporate governance as a critical corporate governance instrument, which would bring about enhanced performance.

2.3.4 Stakeholder Participation

The most important value of stakeholders is the focus on the connection between corporation and their efforts in enabling the creation of value (DeAngelo and DeAngelo, 2010). This principle covers the responsibility of stakeholders to show the involvement with, and conduct of stakeholders who consist of the workers, creditors, traders, shareholders and the surrounding.

In some cases, companies can on their own account choose to be oriented by the stakeholder as this leads to increase in value as stated by Fama (2010). A company cannot increase its value if it does not take into account the desires of its shareholders. Therefore, stakeholder involvement that has to do with performance can be improved if the structure of shareholders’ involvement gives an efficient administration for corporate shareholder involvement in the organization. The top administration has a role to make sure that shareholders get a fair return on their investments; it is also responsible for all stakeholders and it ought to ensure effective management and reduction of conflicts of interest and are sometimes present in the company and also among managers and the stakeholders (Kesner, 2013).

The boards ought to be able to trust and manage the public organization in such a manner that brings sustainable value, while at the same time putting into consideration their connection with greater stakeholder groups that have the workers, consumers, suppliers and the community that are affected by their actions. The relationship of stakeholders has significant effects on performance both directly and indirectly (Gibson, 2013).

2.3.5 Organizational Performance

Organizations with great corporate governance practices use successful risk administration structures and are subsequently better outfitted to adapt to emergencies. A Study by Mehran (2014) inferred that organizations with good governance bring down agency risks bringing about shareowners' and banks' eagerness to give capital at a lower cost to the organization. It is assumed that great governance produces financial specialist goodwill and certainty and inadequately represented public organization are anticipated to be less gainful. Different specialists argued that great corporate governance is imperative for expanding financial specialist certainty and market liquidity (Matolcsy and Chow, 2014).

Corporate governance efficiency relies upon the utilization of values in a way that advantages the stakeholders, extensive schemes and the public management and economic sectors (Kongeo, 2014). Empowering of honesty, upholding, imparting of controls, a feeling of good morals and the settling conflicting circumstances are the benefits of stakeholders. Corporate governance works towards advancing effective assets in the company and the greater economy. It moreover strengthens to bring closer, in little efforts, speculated capital thorough improved financial professionals and creditor certainty nationally and globally. Corporate governance also improves the company’s awareness to the requirements of the people and also enhances long-term sustainable performance to the organization (García and García, 2015).

Good governance leads to an expansive ability and a sound return for investors. Good governance may also add profits to the public sector by better streaming in of assets and enhanced contact to less effort capital, solid inward controls, self-control, which eventually leads to low debt finances (Noe and Tice, 2014). Profound and straightforward budgetary markets, vigorous lawful frameworks, and proficient asset portion uphold organizations that are legitimately administered.

This therefore improves economic and public management soundness and creates universal development rates, while inadequately administered public sector to the contrary (Dvorák, 2015). Djankov and Hoekman (2014) argued that great corporate governance leads to advanced governance and sensible supply of the company’s assets, and improves performance, which would result to the share cost of the company, improving the estimation of the public interest and fulfillment.

2.3.6 Corporate Governance on Performance

Caplan (2014) assert that corporate governance in organizations involves systems, processes and policies that influence organizational performance. According to Mwirichia (2013) corporate governance involves principles and processes, which provide strategic direction on how the business enterprise is operated. To achieve desired ends. Corporate governance guidelines spell out on how the organization is managed to address the needs of various stakeholders. According to South Africa’s Kings Reports (I – V), corporate governance according to the S.A code of corporate practice 1994, 2002, 2002 and 2012, is made up connections built up in the organization governorship that include the managers, the board, the auditors, shareholders and the stakeholders at large.

These links which are made up of the rules and regulations, gives the arrangement of how the public sector main purpose are set, and the main procedure in which to attain the main purpose and also keeping observation on sustainable performance. Developing states are currently progressively grasping the idea knowing it results to economic development. Surely, corporate governance in Kenya is currently increasing some level of acknowledgment with little work in the region even in the very well directed foundations and segments (Mwongozo, 2017).

The main argument that emerges from reports like OECD Corporate Governance documents and Mwongozo is that corporate governance leads to high performance, which thus helps to promote sustainable performance and protect stakeholder's interests. Ho (2015) asserts that therefore, the operational public sector governance key features are structures straightforwardness as well as processes; the managers and the shareholder’s responsibility;

and commitment in the direction of stakeholders. Whereas operational leadership essentially enacts a system for making long-term faith in the public sector as well as external investors, it’s unsuitable to surmise that the corporate governance significance lies completely in better finance access. Public sectors are understanding that better corporate governance enhances their performance; it as well enhances key intuition at the top by drafting autonomous managers who bring an abundance of experience, and a large group of new thought and legitimizes the administration and checking of risks that may influence their daily operations (Kapopoulos and Lazaretou, 2011). Corporate governance additionally restrains the risk of top administration and managers, by articulating the process of basic leadership. It as well guarantees the honesty of budgetary reports and guarantees long-term reputational impacts among key stakeholders, both inside and externally.

Barr (2004) postulates that corporate governance can generate investor confidence and promote the sustainable performance. In addition, lack of proper management policies can lead to reduce productivity. Corporate governance frameworks adopted by competitive public sector can promote several benefits ranging from; enhanced stakeholder relationships and accessibility to financing reduced cost of operations. Therefore, good corporate governance has been associated with adaptability to changes improvement of liquidity, employee motivation and customer satisfaction (Becks et al., 2010).

A study by Labie and Périlleux (2008) highlights that the public sectors are likely to achieve their financial objectives if appropriate leadership policies are in place. Demographics like the education level of employee can influence performance decisions of competitive institution. Well-educated and trained managers are likely to make informed decisions on how public organizations meet financial obligations and vice versa. As echoed by Kapopoulos and Lazaretou (2011) institutions that have policies that promote social corporate responsibilities by meeting obligations of key stakeholders are likely to be competitive in the changing operational environments and vice versa. According to Abdullahi (2000) the public sector is an integral part of the society that needs good operational policies to achieve its sustainable performance set goals. Transparency and disclosure is also one of the corporate governance practices that promote investor confidence

thus competitiveness. Mismanaged finances are likely to experience a decline in performance stability due to lack of investor assurance. Internal control systems are likely to enhance institutional efficiency and effectiveness through public funds reporting, auditing and communication. On the other hand, public sector without effective internal control systems are likely to be financially distressed due to fraud related cases (Tan, 2012). Tamer (2015) assert that the level of corporate governance influences funds management of public organizations in the changing environment. According to Tandelilin et al., (2007) the main point in majority of the studies done, the analysis concerning issues with operational governance has been the responsibility of structure ownership as a mechanism of corporate governance. Most of the areas that are of main concern on corporate governance are its own kind of structure and implications of operation (Otiti, 2010).

Literature on corporate governance topic have mostly been completed in countries like the United Kingdom and United States of America that are developed with developments being done in Africa and particularly Kenya (Wafula, 2013). Though, the idea of governance in Kenya is presently progressively being grasped realizing that it results to economic development and in this way, since Kenya has had a past filled with poor governance framework ascribed to powerless corporate governance rehearses, absence of inner controls, shortcomings in administrative and supervisory frameworks, insider loaning and conflict of interest which may lead to the underperformance of county governments as described in the Kenya’s Mwongozo report (2017). The study thus tested whether corporate governance has a significant influence on performance of county governments in Kenya. The factors that were drawn for further investigation under corporate governance include; inclusiveness of employees, regulatory bodies’ functions, consensus orientation practices and stakeholders’ participation.

Findings shows that Vafeas and Theodorou (2011) and Mangena and Tauringana (2015) in their studies where corporate governance and performance’s relationship were explained through the agency theory; On the other hand, Caplan (2014) study applied Transaction Cost Economics Theory, in drawing conclusions of how strategic management the other two factors related with each other.

In sum, stewardship theory, the agency cost theory, transaction cost economics, stakeholder theory, and theories that have been used and have also given predictions that are contrasting to determine how corporate governance and performance related.

The aspect of corporate governance has had various arguments from different authors who have produced either mixed or opposite results on how the performance of the public sector in several empirical studies. While some studies find better performance for public sector with corporate governance elements (Kapopoulos and Lazaretou, 2011; Önder, 2016; Haniffa and Hudaib, 2015; Joh, 2014; Sulong and Nor, 2010 and; Mandaci and Gumus, 2010), performance was found not be affected by corporate governance in some studies (Rosser, 2013; Tam and Tan, 2016; Wright and Hull, 2015; Ho, 2015; and Tariff, 2012). They find little links in how both performance and corporate governance relate. From this discussion therefore, there was no general model of corporate governance that can best describe how performance relates to corporate governance.

2.4 Empirical Review

2.4.1 Organizational Performance on Performance

Sustainability refers to a term that defines a set of structural changes that affect corporate performance and strategy (Jensen, 2013). The most popular measure of performance in both public and private institutions is the balance scorecard (BSC). According to Franks and Mayer (2014) BSC is used to measure customer satisfaction in an organization and in the public sector BSC measures members of the public satisfaction. The key elements that the balanced scorecard measures include cost, time, quality, internal processes and performance. BSC also measures internal processes of the organization, learning wherewithal that may improve the skills of employees, innovation. According to Dvorák (2014) BSC places the whole organization in a single strategic framework by resource allocation and selection of initiatives. It aligns everyone to strategy in a single framework and measurement processes.

BSC makes public organizations measure their performance through allocating resources in a world where changes are being experienced on daily basis through rational budgeting by anticipating future outcomes thus Jensen (2015) terms BSC as fact-based management 43

replaces intuition. Whatever is happening, whatever changes need to be made, the best practices that need identification and identification of innovation opportunities are raised by the BSC.

In light of BSC and performance of public sector Haniffa and Hudaib, F. (2015) posit that BSC helps in alignment of mission success which include best practices, enhances productivity through efficiency and value. Taxpayers also benefit by being recipients of feedback and customer/ public satisfaction is enhanced.

According to Korczak and Korczak (2013) the BSC cause-effect increased finances through great satisfaction from customers. Customer satisfaction can also be increased through improvement of work processes. Employees can be improved how they work through enhancing their skills and empowering them. Besides BSC is also important to stakeholders as it facilitates feedback, supports accountability and raises visibility of government activities.

Klapper and Love (2014) assert that a strategy-based balanced scorecard system incorporates the collective development of public sector performance focus that points out the connection between: - sustainability performance, efficient processes, market and financial outcomes, customer value, organizational capacity and stakeholder satisfaction. Four strategic perspectives guide the balanced scorecard as shown in Figure 2.5.

According to the figure, public organizational strategy is guided by complementary but different lenses for considering performance which include: - the management of internal processes and employees duties so as to effectively use resources to get outputs that can merit the needs of the public; capacity should be founded on; knowledge and skills, culture, tools and technology, physical infrastructure, delivery of services and information systems required to design, plan, and to members of the public and stakeholders participation; investors and analysts see the public sector as a financial source of returns on their investments and the stakeholders’ regard the rendered services as a means of meeting their needs (Ingley and Walt, 2012).

Figure 2.6: Sustainable balance scorecard

Adopted from Klapper and Love (2014)

The above figure thus, shows best practices adoption in the corporate governance have enacted a strong basis for them through positively impacting on the measures of managements’ well as public sector enhancements all over the world in varied economies (Gregory and Simms, 2013). Hence, most of the decisions made for the public sector and firm operational aspects are exerted with the greater promoters’ family influence as well as

groups over the functioning and management. These affairs mean that investors are comfortable getting a return on their investment. This further keeps the members of the public interests, employees and the society as part of the groups that make the stakeholders in a composed form (Gürsoy & Aydogan, 2012).

Till, and except, the public sector performs well financially and in terms of its operations, its organizers or the governing groups do not get enough inspiration as well as motivation for initiating the superior practices of the governance within the organization (Kiel, 2011). Therefore, this is a cyclical process that includes governance as well as sustainable organization success.

In the Indian context, the matters on public leadership as well as the influence it has on sustainable performance has not been well studied despite the many studies carried out. Major space within the fraternity of shareholders about the enough understanding of harmony practices’ orientation as well as its’ influences on the sustainable performance of the public sector is the sizzling matter to be provoked and deliberate well. Whatsoever scholars’ studies carried out up to now have demonstrated firmly that efficient execution of practices by the shareholders would result in high valuations in the end (Owusu-Ansah, 2015).

In the scenario of global competitiveness, the good corporate governance significance in attraction of the investors as well as amplification of their trust has added drive (Morey, Gottesman, Baker and Godridge, 2014). A lot to empirical scholars as well as researchers have contributed to the fact that corporate governance there is an increase recognition and enhancing performance and also boosting the confidence of the investors’. There have been various studies done on developed, semi-developed and emerging world economies and more studies continue to be done that show how the public sector is being governed well in conjunction with sustainable performance that enhances competitiveness. Numerous investigations have demonstrated that performance has been enhanced through good governance practices in the companies that have made use of them effectively.

This has mainly influenced as well as affecting the various investors strategies to enable greater knowledge of public funds management results. The empirical studies are as analyzed in the subsequent paragraphs.

A study by Cascio (2014) on performance in Bulgaria public sector highlights seven parameters that are used to measure performance. The parameters include: - financial perspective, customer perspective, internal process perspective, learning and growth, social, environment and competitive advantage. According to the study findings, financial perspective and customer perspective are the highest scores, which were as a result of reduced cases of fraud and corruption within the public sector, and this was measured with the extent to which the residents were happy with the services offered. The study targeted top government officials from the Bulgaria public sector who included the Ministers and the instrument used was a questionnaire.

The Lev and Sunder (2012) study on public sector financial performance found that there was a distinct increase in revenue collection that was higher than the inflation rate, there were fewer cases of fraud, the government was able to prosecute more people on fraud issues and there was value for money in every project the government had undertaken. Findings further show that payments to suppliers and contractors were made with fewer delays and that revenue loss loopholes had been sealed to a great extent. The study used an interview guide to collect primary data.

A study conducted by Choi et al., (2014) to fill gaps by Lev and Sunder (2012) shows that public sector need to carry out expenditure responsibilities and provide their populace with the desired services for the public in a regionalized way efficiently. Residents ought then to have an ability of having sufficient revenues to afford those government functions, which should be reinforced through locally raised revenues, by running projects and enhancing greater accountability. This case study targeted a rural community in Pakistan.

A study conducted by Modigliani and Miller (2015) on public sector and how they measure their performance to ascertain their growth found that this was through improved operational effectiveness, which involves establishing benchmarks and determining key performance

objectives. Key to note was enhancement of customer satisfaction by improving and increasing more houses for residents, ensuring they were happy with services rendered and operating better stocked clinics and hospitals. Introducing community policing and enforcing law also enforced security. The quality of education in the technical and vocational training institutions was improved was well as access to wholesome water to residents.

The study, however, recommended that to improve public performance, rural roads needed upgrading and for decentralized framework of service provision to be effective, then there was need to have sufficient fiscal resources collected from the counties to complement those received from the central government.

Fan et al., (2011) conducted a study on internal process perspective using balanced score card (BSC) in public sector operations. The study assessed level of employee morale, cooperation among the county government staff, level of technology adoption and employee performance contracting, which was aimed to enhance worker productivity and reduce bureaucracy. The findings show that employees were engaging more in an informed way about the operations and the county had enhanced monitoring and evaluation. Adapting BSC had indeed provided a real picture of the county operations, balanced the historical financial outcomes helping to implement its strategy. Further findings show that BSC had been successfully adopted and effectively applied in the county. The study used a multiple linear regression to ascertain the relationship between the variables.

Padgett and Shabbir (2016) study on benchmarking of public sector efficiency using BSC as a tool was based on the principle of measuring the learning and growth of one public organization against performance. It can be used to; identify other organizations with processes resulting in superior performance, expose areas where improvement is needed and assess performance objectively. Performance indicators from the study show that time taken to complete projects had reduced significantly over time, the institutions sampled had invested in new and better ways of doing things, they serve customers using innovative ways and the overall performance of the institution had grown. The study adopted two inferential analysis methods − regression and correlation − to ensure triangulation is achieved

Shleifer and Vishny (2015) view of testing whether public sector efficiency was successful, identified operating strengths of competitive advantage in the public sector as:- staff priding themselves with a culture of excellence, communication within the public sector had improved, productivity had increased, teamwork has improved, increased revenue collection while residents had become more and more satisfied with the services offered.

Correlation was used to find out how the two variables discussed in this context associated and to what degree. Shareholders’ interests are expected to be obliged by the enterprise as an expansion that is legitimate according to this outlook. The use of free markets, effectiveness in finances and implication of profits have been advocated in the past decade as a way shareholders use to deal with their properties and the company Gregory (2012). There is guarantee in financial exercises when private property is possessed by individuals seeking their own self-interest.

Kocenda and Svejnar (2014) argue that performance strategy can be realized if the sector is accurately mapped onto the environment in which it operates. The strategy is based on conservation for the benefit of stakeholders, investing in the environment improvement and reducing the number of complaints from the public. The findings were moderated by operational policies, which were the practices and instruments by which public sector rationalize and continuously improve the efficiency of services offered. These policies include decision structures, standards, team synergy, systems, procedures and methods through circumstances that change from time to time that eventually lead to high performance.

2.4.3 Inclusiveness of Employees on Performance

Corporate governance has turned into a significant overall issue in light of the disappointment of organizations (Farrar, 2008; Du Plessis et al., 2011). Consequently, distinctive nations and markets have utilized the essential regular rules of the OECD Principles to realize great codes of corporate governance actions. Good governance is the little removal of corporate resources by administrators or the control of shareholders to enhance assignment of assets. Additionally, great corporate governance assumes an adjusting

responsibility regarding speeding up performance of companies in both advanced and developing states. Conversely, there are various differences in social and financial factors in different states; structures of corporate governance vary according to every country. This leads to differences in comparison of the relationship that exists between corporate governance and the performance of public sector for both developed and developing economies (Lipton and Lorsch, 2015).

According to Haniffa and Hudaib (2015), in order to ensure the desired public institution performance there is need to have inclusiveness of employees in order to assign them different roles. This results to able to address of customer needs and complaints quickly and equally to all residents, employees are provided with the best place to work and that staff develop skills that make performance of their work easy.

Tihanyi, Johnson, Hoskisson and Hitt (2013) assert that responsibilities assigned depend with employee skills and competences. Responsibilities are assigned from the management level to subordinate or support staff according to the organization structure and needs. The most skilled employees depending on their qualification are believed they can handle the management level cascading to the support staff level.

Lins (2013) posits that inclusiveness of employees requires setting of structures which include; having fair recruitment procedures, training structure that are enhanced to ensure participation of all stakeholders and adopted capacity building programs directed at ensuring employees have the same goals. The study also shows that inclusiveness of employees has a significant positive influence on performance of public sector. According to Oyserma (2013) structures set within a public organization are key as they ensure good governance practices are operational at all levels. Structures that ensure effective coordination within the organization ensures the desired performance and outcome that are favourable to the public.

To ensure public sector performance there is need to embrace inclusiveness of employees through teamwork. Those employees that are well equipped with skills will train those who are challenged and the operations will be effective. According to Eugene (2011) employee teamwork can be enhanced through training on technical skills and self-improvement so as to

enhance productivity, regularly review of their welfare to incorporate cultural diversity and ensuring gender balance to promote equality. By employees working together and incorporating their individual capabilities within an organization ensures the set tusks and goals are easily achieved. Franks and Mayer (2014) suggest that this is an element of good governance that needs to be strengthened.

Siha (2013) argues that the risk in the inclusiveness processes adopted can be limited when managers have a proprietorship interest in an organization. This union of-interest keeps up that the interests of administration and shareholders turn out to be more adjusted and the impetus to enjoy astute conduct reduces as the extent of value possessed by insiders' increments. Around this area, insiders and administrators and executives who, apart from being partners, additionally take an interest in the basic leadership process. In this unique circumstance, Oman, Fries and Buiter (2014) proposes that, for most organizations, managerial ownership enables administrators to settle on better choices, which upgrades corporate governance quality.

Lewellen et al. (2003) show that when there are proper structures set and there is management discipline, choices of acquisition are gotten more emphatically by the market. Even though overpowering duties could show the existence of administrative entrenchment, Kang and Stulz (2011) explain that managers could enjoy entrepreneurial conduct, which is in opposition to stakeholders' interests. However, this entrepreneurial conduct can be limited if the public sector receives certain governance qualities identifying with motivating force and observing components that is strong governance. Managerial discipline is coupled with awareness, abilities and characters that make an administrator of an organization special, and to carry out his roles as pointed out by Jensen and Meckling (2014).

Awareness and power are the two main human assets that are integrated by intellectual capital. The study was inclusive as the study ensured the administrators and support staff are incorporated in the study. Arregle (2014) points out that human resource is an important aspect of governing a company and it also controls the performance trend of the administration’s hard work. Knowledge-based community, managerial changes and the

financial and economic changes create the development under which the organizations operate (Gunasekarage, 2011). Usage of agency cost theory together with the discipline of management are viewed as the main characteristics of people that result to or develop great job funds management.

Franks and Mayer (2014) illustrated that funds management-based method involves three connected aspects; hybrid, role-focused, person-focused and job-focused approaches. They give the prospect of investigating which factors of managerial ability attained (abilities and awareness) or personal elements (inborn characteristics) are of more importance. The study adopted two inferential analysis methods that was regression and correlation to ensure triangulation was achieved.

As per Kim and Sul (2016), a well-disciplined administrator is required to have the following attributes; Context particular awareness and skills, curiosity, individual character (association and uprightness), duality (the limit with regards to overseeing vulnerability and the capacity to adjust strain) and sharpness (business astute and organizational adroit). There are basically four sort of corporate structures which comprise of those owned by foreigners, those owned jointly, private household owned, and those owned by the state.

As indicated by Gable (2014) the basic and organizational contrasts amongst foreign and residential cash exchange organizations may have suggestions for contrasts in cost structures and scale and extension economies. These contrasts result from various administration techniques, contrasts in business sectors they serve, learning of the neighborhood markets, global cooperative energies, and direction. It is the scholarly capital that incorporates the two fundamental HR awareness and power. This study reviewed how counties form as service delivery points.

According to Umble and Spoede (2011), the human resource is a key element for overseeing interior condition of an organization and decides the sustainable management course of administrative efforts. Organizations work the situation being what is made by the development of three procedures with universal spread; the financial globalization, the administrative transformation and the information based society (Durnev and Kim, 2015).

As per agency cost theory, discipline portrayed by workers and chiefs can be viewed as the fundamental attributes of a man that prompt or cause predominant or powerful measure of sustainable performance (Gulbrandsen, 2015). Sustainable performance based approach, as indicated by Kuroki and Masuda (2013), includes four related methodologies; work centered approach, individual centered approach, part engaged approach and crossbreed approach. These methodologies give the chance of discovering which train of administrative ability obtained (information and skills) or in conceived (individual attributes) is more essential.

The capability and conduct of directors customarily ought to be more exceptional due to current economic substances of globalization, changes in administration unrest and organizational disappointments. Organization disappointments are because of poor administration resulting from absence of corporate and administrative skills (Grossman and Hart, 2011). In the breweries industry, it has for some time been discovered that administrative viability has a critical role to play in organization performance, plus other aspects like capital sufficiency, resource quality, income power and liquidity (Gillan and Starks, 2014)

Guest (2010) says that there is a possibility of one becoming a decent manager where there is steady learning and reliable procurement of experience to enhance ability. Administrative practices/performance specifically impact activities of subordinates in the workplace (Gordini, 2012). Leadership is the capacity to impact others by influence, illustration, and tapping internal good esteems (Giannetti and Koskinen, 2014).

Managers’ discipline is found especially in specialized, human and applied points of view. This position has additionally been extended by Gabrielsson and Winlund (2014) to consist of; specialized skills which guarantee work achievement relational abilities guarantee correspondence capacity with other individuals, calculated skills which is capacity to see the general picture and objectives of the association, indicative abilities or capacity to evaluate and respond to individual circumstances, relational abilities which relate nearly to relational abilities and enable you to both hand-offs and get considerations and thoughts.

D‘aveni (2015) writes about managerial structure and abilities to identify challenges and efficiently recognize and conclude on a strategy of action, managing of time to allow for acknowledgement, arrangement and allocation of work in the best way possible. This then shows that the bringing together of managerial, technical, human and conceptual skills and converting of these to performance leads to effective organizational funds management.

In the effort to study how exercises and abilities of administrators, influence the funds management of the public sector, Zingales (2014), recognized six manifestations called administrative negligence in organizations. These are the determinations of new directors from among the best entertainers paying little heed to or absence of relational abilities, advancing representatives that need supervisory or administration ability, and holding administrators who are incapable of securing, comes about through others. The corporate governance handle in an organization consequently ought to be connected to public performance (Karolyi and Stulz, 2011). A number of studies have been conducted with a view of analysing the relationship between inclusiveness of employees on performance as presented in the next paragraphs.

An Abeywardena, Raviraja and Tham (2012) study shows that, in public service delivery, horizontal inclusiveness is attained if those with equal need are treated equally. Vertical inclusiveness on the other hand is attained when inclusiveness of employees, that is those with unequal need are treated unequally, in accordance to their needs. In some public organizations where service delivery is often viewed through ethnic or regional lenses, attaining vertical inclusiveness ensures that all are treated appropriately in accordance with their needs regardless of their ethnicity or region of origin. This enables the minimization of unnecessary or unjust inequalities even where people or regions do not fair equally thereafter. It is important to note that inclusiveness of employees requires that no one is made worse off than they were before.

This means that in the face of scarce resources, the status of the most well off in society should at least be maintained at the same level even as concerted efforts are made to improve the status of the less well off. This is the basis of affirmative action and positive discrimination. According to Black and William (2016), the management of the public sector 54

should try and move from complete centralization to complete decentralization. In reality, however, the two extremes are not always achievable. This is because the choice of management systems across the public entities varies over time and across space in a complex mix of activities. Besides, devolution is arguably the most extreme form of decentralization under a unitary system of government.

This involves the ceding of substantive national government authority and power to sub- national entities, which may consequently be in charge of policy making, policy execution and revenue generation. Devolution may further involve de-concentration that includes the transfer of executive power and resource allocation downward to the lowest level within the county − in this case the ward. There is therefore the need to incorporate inclusiveness of the workforce so as to ensure that services are delivered equitably to all members of the public.

The study by Treece, Treece and Tshukudu (2014), found that there is a significant relationship between inclusiveness of employees on one hand and the public sector performance on the other. The study found that homogeneous teams of employees tend to perform poorly as compared to those from different ethnic groups. According to their findings, ethnic differences among employees can become a source of strength and hence are more likely to improve both individual and collective performance. They also observed that ethnic diversity in organizations tends to bring out the best in each employee thus creating harmony and less disruption in the working environment. The study was inclusive as the study ensured the administrators and support staff were incorporated in the study

The study by Shea and Bidjerano (2015) showed a significant relationship between the gender of an employee and performance. It found a positive co-relation between gender and performance. Robbins, Simonsen and Feldman (2014) also showed a strong positive co- relation between organizational performance and the gender diversity of its employees.

The study by Poister and Thomas (2017) found that various public sectors have the policies and strategies to support the different gender groups. They also tried to offer equal employment opportunities between the male and female genders. Various studies have

supported the relationship between the performance of the public sector and the mean productivity level of its workforce when viewed along gender lines.

Osborne and Waters (2012) study found a strong positive co-relation between the educational background of an employee, inclusiveness and performance. The study showed that the availability of many education types in an organization tends to bring forth innovation. The same is also true for those organizations, which try and strike a balance between the many education types among their employees. The study notes that a business environment can help bridge both the lack of education and skills among its employees by providing them with on-the-job training and further education.

O’Meally (2015) also indicates that education is important when gauging the performance employee in cases where employees with different education backgrounds are compared. Employees with a higher level of education perform better than those without. Okello, Oenga and Chege (2011) with regard to the education verses performance of employees found that the more educated an employee is, the better he/she performed.

Klijn and Koppenjan (2013) study found that inclusiveness in the workforce is essential to the organization as it is a major concern. The findings show that organizations need to rethink and handle the diversity of their employees in a careful manner. There are some important factors an organization should consider while planning its workforce inclusiveness. For there to be inclusiveness, those factors should be managed correctly.

The Eugene (2011) study points out that ethnic diversity can pose a problem for an organization in that it can affect performance both positively and negatively. According to Oyserma (2013) ethnic diversity in an organization can have very negative effects. The study concludes that ethnic diversity among the workforce can bring with it challenges such as; in- group attraction, in-group liking, and in-group favoritism. These may affect the behavior of individual employees such that they may tend to favour fellow employees who belong to their ethnic group over those belonging to other ethnicities. According to the study, this can lead to severe consequences for the organization resulting in less communication, less cooperation, less cohesiveness, and more conflicts.

The study by Jones, Goodwin and Jones (2015) that sought to evaluate the influence of inclusiveness of the workforce versus performance found that many organizations preferred to hire male employees as compared with female employees. This is because of the perception that men are better performers and have ability to manage their jobs as compared with women. The study showed that an employee’s gender does affect the performance of the organization though it does not concern the organization in a big way. Employees are not overly concerned with gender identity although each employee is expected to meet his/her productivity targets. Being able to meet their targets was more important than the gender of an employee. Indeche and Ayuma (2015) also showed a positive link between the gender of an employee and performance. However, performance appraisals were used to make those important promotion or compensation-related decisions rather than to gauge gender weaknesses.

Tauringana and Chamisa (2016) conducted a study on evaluating the influence of inclusiveness in enhancing performance. The study found that effective inclusiveness strategies enhance performance by ensuring employees are able to address customer needs and complaints quickly and equally to all residents, employees are provided with the best place to work, staff develop skills that make performance of their work easy and this is as a result of the organization ensuring they practice fair recruitment procedures.

The view of Karamanou and Vafeas (2015) was consistent with these findings as establishment of an understanding that is widespread and committing towards priorities at hand were involved in the implementation of strategic inclusiveness. Punch (2016) study suggests ways of enhancing inclusiveness. This factors include training structure aimed to ensure participation of all stakeholders, adopting capacity building programs directed at ensuring employees have the same goals, training employees on technical skills and self- improvement so as to enhance productivity, regularly review of employee welfare to incorporate cultural diversity and ensuring gender balance to promote equality. These findings were consistent with Cubbin and Leech (2016) findings who suggest that employee involvement and welfare, when associated with the performance strategy of the organization are able to improve performance and effective execution of activities in the plan of strategic

business as a major role. Empirical studies on inclusiveness process relates to sustainable performance. In Lin‘s (2013) study, on concentrated control of the development of corporate governance, transition and economies of the emerging markets, tested if inclusiveness proprietorship as a strategy of corporate governance supported by the best practice programs are efficient in enhancing performance of Spanish public sector example of some companies in 1999 to 2001.

He found out that the connection between the management of salaries and two main factors of corporate governance that include the inclusiveness process, the composition of the board and the presence of a monitoring committee. The outcomes of the research show that the composition of the board greatly controls the process of manipulation of salaries. On the other hand, the main responsibility in restraining such a process is not carried out by independent directors like in the UK and US studies but is carried out by the institutional directors. No relationship was found to exist between an independent structure and the measures of public sector performance. The study was moderated by the existence and composition of internal policies, which affects the inclusiveness on performance of the sampled public sectors.

In a study to find out the influence of inclusiveness of employees on performance of public sector in Ontario, Canada, King (2013) used the following objectives; to find out the effect of inclusiveness on employee satisfaction, employee productivity, employee retention and innovation. He used descriptive research design. The study targeted 50 counties with their headquarters in Ontario. He used questionnaires and interview guides for data collection. Regression was used in analyzing of the data. The study found that inclusiveness in the public sector improved performance and in that the counties that were more diverse reported better employee satisfaction, higher productivity, better employee retention and better creativity and innovation.

To find out the influence of inclusiveness of employees on performance of the public sector in Lebanon, Chalhoub (2009) targeted 36 county governments. He used descriptive research design. He used questionnaires for data collection. Linear regression was employed for data

analysis. The study found that the public institutions that were more diverse and more inclusive reported better performance, better employee satisfaction and better employee retention.

A study by Vafeas and Theodorou (2011) on the association between the structure of the public sector and their performance in the United Kingdom found that in every effective public unit, stakeholders will redact the price they want to pay for services by the needed stage of administrative agency costs. This was much affirmed that for corporate governance they need to improve its returns to organizations stakeholders, and also the national government needed to reduce on taxes and charges for services rendered.

This was emphasized that for an organization’s corporate governance actions to have an impact on the value of market, two factors must be applied. Increasing of returns is the first factor to the company’s stakeholders and the stock market ought to be effective so as to share prices reveal important aspects. These factors are expected to be contented in established markets than in upcoming markets.

Tihanyi, Johnson, Hoskisson and Hitt (2013) study on institutional ownership differences and international diversification in shipping companies operating in Bosnia. The study found that the average board size was 4 with a diverse and professional and business inclination, which presupposed that the companies observed and practiced good governance mechanisms. They concluded that time had come for the maritime industry to formally come up with a uniform set of inclusiveness process which every shipping company operating in Bosnia should be encouraged to follow.

Stearns and Mizruchi (2013) investigation on the influence of financial organization illustrations on performance conjectured that, the act of profit administration is methodically identified with the quality of interior corporate governance instruments, including the top managerial staff, the review board of trustees, the inward review work and the decision of outer reviewer. In light of a wide cross-sectional example of 434 recorded Australian public sector, for the money related year finishing off with hypothesized that, the act of profit administration is methodically identified with the quality of interior corporate governance

instruments, including the top managerial staff, the review board of trustees, the inward review team and the decision of outer reviewer. The Australian public sector used 434 companies where an example of wide cross-sectional was used, they used the 2010 financial year, and most of the non-official directors’ presence was found to review the advisory group which connects the lower level of probability of profit administration, as measured by irrefutably level of optional groups. The controlled foundation of an inner review work and the decision of evaluator are not essentially identified with a diminishment in the level of optional groups. Utilizing little increments in profit as a measure of income administration, the outcomes additionally found a negative association between inclusiveness measure and performance of the public sector.

Rosser (2013) investigated the coalitions, convergence and corporate governance reform on performance of twelve listed banks in Indonesia between 2005 and 2012. The corporate governance factors were characterized by initiative structure, composition of the board, size of the board, executive possession, institutional proprietorship and square proprietorship, while bank effectiveness was utilized to measure performance. The discoveries found that littler board size and higher rate of piece proprietorship resulted to better productivity. In any case, whatever is left of the corporate governance factors did not have a remarkable and reliable effect on efficiency.

Tam and Tan (2016) studied the ownership, governance and performance in Malaysia by sampling 93 firms quoted on the Malaysia Stock Exchange for the period 2009 – 2014. The findings were that inclusiveness process was significantly positively related to performance. While putting forth a defense for a board structure and size of ten and for concentrated rather than diffused inclusiveness proprietorship, the outcomes contended for the partition of the posts of CEO and Chair. Besides, in spite of the fact that the outcomes found no confirmation to support organization structure with a higher extent of outside chiefs perform superior to anything different firms, there was proof that organizations keep running by exile CEOs tended to accomplish more than those keep running by indigenous CEOs.

Wright and Hull (2015) study titled corporate governance from accountability to enterprise by specifically examining the connection among four corporate governance instruments (board size, board composition, CEO status and review advisory group) and two firm funds management measures (ROE, and net revenue), of an example of twenty Nigerian documented firms in the vicinity of 2009 and 2014.

The outcomes give proof of a positive huge connection amongst ROE and board size and also CEO status. The review suggested that that the board size ought to be constrained to a sizeable point of confinement and that the posts of the CEO and the board seat ought to be involved by various people. The outcomes additionally uncovered a positive critical connection between structures and firm performance. The review, though, couldn't give a huge connection between the two performance measures and board composition and review panel.

The outcomes unmistakably demonstrated that there was a solid connection between the needy factors (firm performance) and the autonomous factors under the corporate governance handle (the four − corporate governance systems board measure, board structure, and CEO status and review council) at the percentages level of 1, 5 and 10.

According to local studies as tackled by Manyuru and Mutisya (2012) on the relationship between inclusiveness using structures as the main indicator in the Nairobi Securities Exchange listed firm’s performance. A positive correlation was found between funds management and corporate governance. According to the findings managerial discipline, annual board meetings and the proportion of shares held by top shareholders were found to considerably and positively affect performance of firms.

Ongore and K’Obonya (2011) study on incentives in principal-agent relationships examined the interrelations of the employee operations and director attributes and firm funds management in a sample of 54 firms listed at the NSE.

Governance was measured as far as possession focus, proprietorship personality, board viability and administrative efficiency while financial performance was measured using

ROA, ROE and DY. They found a huge positive connection between foreigner, insider, institutional and differing proprietorship structures and performance. In contrast the connection between representative operations and government, and performance was altogether negative. The responsibility of the board was observed to be of next to no esteem, predominantly because of absence of adherence to the company structure. The results further found that performance and managerial discretion had a positive, significant relationship.

Gitari (2015) on the assessment of inclusiveness on performance of public services. This was a case study conducted in the New KCC sought to establish whether there was any association among the process of corporate governance and the state corporations’ success. He focused on the role of Board of Directors in state corporation leadership which also has a mandate of overseeing the running of the corporation.

It was revealed that good corporate governance inclusiveness was adopted by New Kenya Co-operative Creameries Board, which were studied as well as being enhanced over time and had resulted into enhanced performance.

Various principles of corporate governance which were noticed included Board appointment and leadership, organization structure, determination and values, power balance in the Board, firms’ communication, Board performance assessment, stakeholders’ responsibility as well as social and environment responsibility. There are other issues that arise during corporate governance and therefore more structured mechanisms need to be put up so as to ensure that performance is effectively enhanced by good corporate governance practices. Every organization has its set goals and objectives which should be realized from time to time and thus corporate governance practices need to be monitored from time to time to ensure that the organization’s performance is enhanced. Mang’unyi (2011) explored governance mechanisms and their impact on sustainable performance of firms inside Nairobi, Kenya with reference to business banking sector. 40 bank managers drawn from state-claimed, privately possessed and outside possessed managing an account organization taken an interest in the review.

The findings demonstrated no significant connection between possession and performance, and between banks proprietorship structure and corporate governance forms. Additionally, it uncovered that there was critical contrast between inclusiveness and budgetary performance of banks. Conversely, remote claimed banks had some preferable performance over locally owned banks.

Wachudi and Mboya (2012) investigated the effect of inclusiveness of employees on performance of manufacturing firms in Kenya. The study targeted all the 32 commercial manufacturing firms. They used descriptive research design. Data was collected using self- administered questionnaires. Data was analyzed using correlation. The study found that inclusiveness in the firms had no impact on the performance of those firms.

2.4.4 Regulatory Bodies on Performance

The second pillar is regulatory bodies, which govern how public organizations operate. Regulatory bodies’ role including; implementation of guiding ethics, protection of stakeholders’ rights focusing on citizen interest as the top most and how communication cascades from the management to the members of the public.

For the regulatory bodies to be effective and efficient they require checks at all stages and rules of implementation This results to leaders who manage the assets in the best way, primarily so as to attain the best results. This consists of rules so as to attain the firm’s long term aims, which mainly is within the communication processes as put down by the administration in understanding the image of the organization (Andrade and Kaplan, 2014). These results to the governance aspects put forward that impact performance of firms and are significant to the conceptual structure as an aspect that influences funds management which is in line with the agency theory.

According to Franks and Mayer (2014) regulatory bodies are tusked with three main functions that are ethics implementation, protection of stakeholders’ rights and ensuring effective communication procedures.

According to Mwongozo code of conduct, National Treasury, County Public Service Board and county executive committee are some of the bodies that are entitled with regulatory functions of the county operations in Kenya. Besides, regulations set by the Public Procurement Regulatory Authority regulate and shape the county’s procurement procedures. These bodies oversee the control, administration and management of the county operations with the purpose that promote objectivity (Onyango, 2014).

In enhancing county government performance ethics implementation according to Korczak and Korczak (2013) is through ensuring the county has performed well in fund management compared to other counties, ensuring risk management is adhered to minimize the same and ensuring checks and balances at all stages of public funds utilization set regulations. Shleifer and Vishny (2016) point out that when employees abide by the set corporate governance ethics performance is assured. This benefits both the organization and the beneficiaries who include members of the public.

Protection of stakeholders’ rights is key in enhancing public sector performance according to Dvorák (2014). This is through networking with other like-minded public organizations so as to satisfy the public needs, the regulatory bodies enhance market openness and this creates fair working conditions that favor investment and trade. According to Lins (2013) if stakeholders’ rights are protected then the desired vigor from them is seen which ensure oversight and public interest is as well achieved.

Mang’unyi (2011) found that communication procedures by the regulatory bodies are vital while conduction the governing functions. To ensure performance of the public entities there is need for effective communication procedures from the managing team to the members of the public and have well set regulatory conditions that are set to motivate co-ordination within the public sector. This enhances performance and ensures. Bektas (2013) points out that corporate governance rules ensure minority stakeholders or shareholders are protected from exploitation by managers or controlling shareholders. Corporate governance rules are partially a function of the quality of management, with given agency problems within the firm, will be a function of the quality of governance structures within the firm. Observable

factors related with governance structure, for example, the responsibility for administration and the top managerial staff, the compensation package of top administration, and the creation of the directorate will differ in ways so that organizations with specific sort of structures deliberately outflank firms with other administration structures (John and Senbet, 2015). Having a successful powerful regulatory body is an expanding capacity of enhanced governance quality among firms with high free income.

With the presence of governing regulatory bodies, there is a variation as the governance benefits are lower and insignificant (Grossman and Hoskisson, 2016). An arrangement of corporate governance comprises of those formal and casual establishments, laws, qualities, and tenets that create the menu of lawful and authoritative structures accessible in a nation and which thus decide the circulation of energy how possession is doled out, administrative choices are made and checked, data is inspected and discharged, and benefits and advantages allocated and appropriated (Ehikioya, 2010).

Gupta and Boyd (2014) strengthened a two-framework characterization to consider corporate governance rules viability in guaranteeing sustainable performance of a firm. The structure comprises of the accompanying: unitary frameworks, for example, it is different in countries like the US and UK that rely mostly on compensation and the corporate control; double systems, for example those in Germany, France or Spain that use control and power so enlarge character of the directors and stakeholders.

Michel (2012) achieved a comparable order recognizing unitary and double frameworks of corporate governance. The main characteristics for the viable corporate governance administration is a dynamic outside market for corporate control, which is a component for free shareholders to impact administrative basic leadership. Such markets incorporate stock, work and hostile takeover markets. By comparison, in the double frameworks, oligarchic groups with various personalities considerably influence administrative basic leadership by more straightforward methods of impact. Mizruchi and Stearns (2015) posit that regulatory bodies operate an organization in a manner that the power of a partnership is practiced in the stewardship of the company's arrangement of benefits and assets with the target of sustaining and improving shareholder esteem and fulfillment of different stakeholders with regards to its 65

corporate mission. Leech and Leahy (2014) further show that corporate governance rules in relation to government as the how the government exercise their power and authority practically and also how they manage their affairs generally particularly in the economic development. Effective corporate governance rules are an important idea for African development and is connected, most importantly, to the need to make the fundamental additional economic conditions that are essential for the development of African economies, for instance a viable public organization, a useful lawful system, effective administrative structures and straightforward frameworks for financial and lawful responsibilities. In this specific situation, it is the issue of the nature of the general population products provided at national level that makes good governance such a critical idea (Karamanou and Vafeas, 2015).

International associations, for example, the World Bank and the OECD, have urged other administrative bodies to actualize decisions involving corporate governance of international standards. Likewise, corporate governance rules have been created (Jensen, 2015).

Components such as enactment, direction, deliberate responsibilities and business practices are the standards that make up the corporate governance structure. Doing the right thing for the public encourages these types of people, as they believe that they will benefit at the end when the public needs are satisfied. Resources are distributed to the people fairly through formation of a public organization that ensures that resources are directed through specific marketing costs by the county government according to the OECD (Greene, 2014). Subsequently, numerous nations have enhanced their programs by use of the OECD Principles in their organizations, which ensures actualization of great corporate governance, which then improves the overall system, which is significant in most of these countries that have embraced it (Larmou and Vafeas, 2010).

It was demonstrated by the OECD that corporate governance regulations embrace is key way of inevitability as well as authorizing steadier and long-term universal speculation (Tauringana and Chamisa, 2016). The Principles of OECD were developed in view of four central ideas: responsibility, obligation, decency as well as transparency (Jordan, 2011).

Differing qualities of standards and directions are taken into consideration by the Principles and are essentially concerned with public substances. They were sorted out into five segments in 1999 and revised in 2004: the privileges of stakeholders, the impartial treatment of stakeholders, the part of partners in corporate governance, exposure and openness, and the duty of the administration (Sharar, 2013).

In countries that are developing, being in support with productive and actual regulatory bodies has turned into a need since it can enhance perfection of the administration and help organizations in pulling in of foreign financial specialists so that they can expand their capital despite the fact that their corporate governance structures are poor (Thomas and Palfrey, 2016). Issues such as control of legitimacy that is frail, economies that are unverifiable, poor speculation of insurances and intercession by the government influence developing nations’ corporate governance that is the reason why these countries will not have a great corporate governance despite embracing great codes of OECD Principles as contended by Borghesi, Houston and Naranjo (2015) regardless of these countries having a good plan of embracing these codes (Martin, 2015). Most of the markets that are developing do not manage governance issues effectively due to lack of the attributes expected such as frameworks that are long established in the economic organization.

The literature recommends that feeble corporate governance prompt to poor performance and disappointment among stakeholders (Fan and Lang, 2012). Clearly, less developed nations need to embrace viable administrative bodies to take care of these issues and support new practices for executing the diverse elements of corporate governance in creating economies (Cubbin and Leech, 2016). In developing business sector nations, improving corporate governance could give numerous basic public approach destinations. For instance, effective regulatory bodies diminish developing business sector defenselessness to performance crisis, strengthens property rights, lessens exchange costs and the cost of capital, enhances firm performance, and upgrades the capital market (Gill and Mathur, 2011).

According to Gorton and Schmid (2011) regulatory bodies issues have emerged in public discussions, the developing nations are yet lingering behind as for the OECD Principles.

Additionally, the idea of a corporate governance framework in these nations is less across the board than in Western nations (Gillan and Starks, 2013).

Nevertheless, the need to enhance corporate governance in the African continent was highlighted by the 2008 universal crisis. Subsequently of this crisis, more pressure prompted to the utilization of corporate governance standards, which were for the most part considered the answer for the issues happening in these nations' market surroundings.

Additionally, across the board dialog on this topic has expanded awareness in the continent with respect to the need to build up an arrangement of corporate governance to improve budgetary transparency (Lehn, Patro and Zhao, 2014).

In this way, in this manner, effective adoption of effective regulatory bodies and corporate governance rules shows that it produces better economies and confront ongoing challenges, such as enhancing the set ethics, promoting protection of stakeholders’ rights and improves communication procedures in an organization.

The above findings are supported by empirical evidence by scholars in the same areas as presented. Kapopoulos and Lazaretou (2011) study on factors influencing firm performance found that regulatory bodies are positively related to service offered. The regulatory bodies were found to be influenced by fund management, having checks and balances at all stages of public funds utilization and having effective communication procedures from the managing team to stakeholders. The study found that the firm had created fair working conditions that favor investment and trade. It was also found that having regulations set by the Public Procurement Regulatory Authority to regulate and shape the county’s procurement procedures enhanced performance.

Guyo (2012) who studied the effect of regulatory bodies on performance noted that some regulations should be linked to service delivery to members of the public. This is because members of the public are the end-users of public services. The study by Garrison, Cleveland-Innes and Fung (2014) showed how different organizations adopted similar formal structures and characteristics despite operating different technology types. According to

them, there are three interdependent forces of regulatory bodies, which are based on the coercive, the mimetic and the normative. Fiedler, Glöckner, Nicklisch and Dickert (2013) investigate how regulatory bodies influence performance. He identifies the four phases that members of an organization undergo while learning from the performance review process. These are as follows; Identify; this is where an individual tries to understand the performance data while identifying any performance gaps, integrate; this is when the individual shares his/her own interpretation of the data with other members in the organization, Search; where a solution is not achievable, employees can search for more information, Implement; this is where members of an organization try and put the chosen solution into practice.

Erickson, Hamilton, Jones and Ditomassi (2013) in his study adapted the performance measure questionnaire, which assessed three aspects. These are; decision support, work integration, and customer service. Coram and Burnes (2015) conducted a study on regulatory bodies and its impact on public institution performance. The study sets a benchmark against which employees can measure themselves when moving between organizations. Cassia and Magno (2017) study on the relationship between regulatory bodies and performance show that any negative response by employees to the current or future change in policy may not just be refusal, but could be a response to unpleasant experience with similar policies in the past.

The Buchholz (2014) study on the influence of regulatory bodies and organizational performance on organizational commitment notes that public policy will succeed depending on how best the wishes of the people are taken into account. Similarly, management expectation on whether the policies of the organization will succeed depends on understanding their employees’ psychological needs. The study by Hope (2013) on devolution established that regulatory bodies in a decentralized system could help to promote government responsiveness in service delivery to the public (citizens).

Ndegwa (2002) took stock of regulatory bodies in decentralized systems across thirty Sub- Saharan African (SSA) countries. He relied on reports made available by fellow colleagues working with the World Bank in the countries concerned. Monnikhof and Edelenbos (2016) researched on the role of regulatory bodies with regard to the local authority transfer fund. 69

This fund has been hailed as an important way of addressing inequalities across local authorities. He identifies the major challenges facing the implementation of this mode of project financing at the local level.

Muriu (2014) study sought to look at devolution from a donor-funding perspective in relation to the governing bodies. The report notes that in case no one took up the policies that set out opportunities and challenges, then reforms would not be possible. Donors cannot succeed in bringing forth any institutional reforms unless the population demands change. Khaunya, Wawire and Chepngeno (2015) study suggests that a devolving state should adopt policies to the firms or regions while motivated by different reasons for each region/county.

Devolution should thus be implemented after carefully considering and analyzing the merits and demerits of the system. However, Isham and Kähkönen (2016) assert that both historical and political factors play a critical role in the decision to undertake devolution. They also determine the type of devolved system to be established. In order to ensure that fiscal decentralization is undertaken, Hyndman (2017) emphasizes that having strong and effective regulatory bodies is one way of aligning the responsibilities and fiscal instruments with the proper levels of government.

To find out the functions of regulatory bodies on performance of public firms in Nigeria, Brennan and Solomon (2012) targeted 21 publicly-owned firms. They used descriptive research design. The study used questionnaires for data collection. Linear regression was employed for data analysis. The study found that firms that were regulated reported better performance. The employees were more motivated as their work was measured and remunerated accordingly. The employees were more satisfied with their work and had worked for many years in those firms.

Kapopoulos and Lazaretou (2011) study shows that successful implementation of formulated strategies requires regulatory bodies through practices that offer employees a better understanding of the organization’s strategy. Regulatory bodies create a risk in managing the organization in that conditions were set to motivate co-ordination with other institutions, the set regulations enhance networking with other like-minded firms so as to satisfy the public

needs and market openness enhanced the organizations’ regulatory bodies to a very great extent. The significance of regulatory bodies the variables used as presented above were all statistically significant to performance.

The question on whether or corporate governance rules ensures sustainable performance has been of much debated from various scholars. Caplan (2014) study on internal controls and the detection of fraud examined the influence of corporate governance rules on performance management in an emerging market as one of the variables by considering the case of Thailand. The study used 320 listed companies from year 2010 to 2015 with a great cross- section. They found that a standard deviation increment in the implicit rules appropriation file was identified with a 10% expansion in normal firm esteem while controlling for firm- particular elements and industry impacts. The connection was exceptionally critical and not present preceding the presentation of the set of accepted rules, recommending a causal connection from implicit rules appropriation to firm value. There was solid confirmation of a positive connection between the reception of a corporate governance set of principles and firm an incentive in a developing business sector.

To confirm the above findings and to fill an identified research gap by Caplan (2014) in his study on corporate governance and development on the tide ‘s gone out the authors here tried to focus on the governance rules and share price movement to measure performance capacity of a firm. The findings show that adoption of the corporate governance rule as a strategy brought more profits to the firms and enhanced performance. The two studies were in line with Caplan (2014) findings thus confirming adoption of corporate governance rules influence performance. Ho (2015) study titled corporate governance and corporate competitiveness studied the control and enforcement of corporate governance by the capital markets authority in Tokyo, Japan. The study targeted the management of the sampled firms. The study found that the authority has put in place various measures and reporting requirements for listed companies, which essentially act as a guideline. Control and enforcement of the rules/guidelines are effected through various means including use of fines and penalties. This study concluded that there is however varying levels of control and enforcement of the rules and guidelines against prescribed measures. Mwirichia (2013)

conducted a survey on International Comparative Analysis on how the Nairobi Securities Exchange Kenyan firms disclosure corporate governance in comparison with other economies that are developing.

The companies listed in NSE were found to have mire disclosure of corporate governance despite the fact that a gap was found between the reports it being good and poor; Companies in the financial sector found to make more intensive communication with their shareholders than non-financial companies. The overall conclusion shows that corporate governance rules significantly influenced the firm’s performance by whether or not the company is in the finance sector and to a great extent the influence was great on the protection of stakeholders’ rights.

To validate Mwirichia (2013) findings, Ong’wen (2017) conducted another study in NSE analyzing the NSE’s quoted companies and how their fiscal performance was connected to rules of corporate governance. He was keep to find out whether the firms that had adopted corporate governance had improved their performance compared to those that had not yet implemented strategies on adoption of corporate governance. Some 43 firms were used as the respondents in data collection.

The multiple linear regression model was used in analyzing of the data collected. Those firms that had adopted corporate governance attributes according to the law were found to correlate positively with sustainable performance compared to those that had not and their levels had exceed minimum. This thus showed that firms benefited from rules of corporate governance that exceeded the minimum level.

Ngumi (2016) surveyed the corporate governance rules in the Housing Finance Company of Kenya and found that HF had effective corporate governance rules as recommended by the various banking industry stakeholders. Both regression and correlation analysis was used to test the hypothesis. Findings show that the board of HF is in charge of the general administration of the bank and is focused on guaranteeing that its business and operations are led with honesty and in consistent with the law, universal acknowledged standards and best practices in corporate governance.

In a study to evaluate the functions of regulatory bodies on the performance of parastatals in Kenya, Njoka, (2014) used descriptive research design. The study targeted 15 parastatals in the Ministry of Agriculture. He used questionnaires for the employees and interview guides for senior management while collecting data. Data was analyzed using linear regression analysis. The study found that regulatory bodies played a key role in improving performance in parastatals in that regulators ensured quality assurance and better service delivery to the clients.

Gakeri (2013) investigated the effect of regulatory bodies on performance of listed firms in Kenya. The study targeted all the 67 listed firms at the Nairobi Securities Exchange. The study employed the descriptive research design. Administering of questionnaires was used in collection of the data. Regression and correlation were used to analyze data.

The study found that regulatory bodies enhanced firm performance through ensuring measurement of what needs to be done, providing direction on how things should be done and providing examples of best practices the world over.

Lang’at (2016) studied how the Nairobi Securities Exchange quoted firms’ funds management related to the corporate governance rules and found that communication procedures and ethics as corporate governance rules dimensions were all related to the firm’s performance in a positive way. The Nairobi Securities Exchange’s listed firms were investigated by Kihara (2016) and how their performance related to corporate governance rules; the stakeholders’ rights protection were the indicators of the study ad no relationship was found between the two. The firm’s performance indicators and those of corporate governance were also included. The firm’s performance was found to be affected positively and significantly by ethics.

Kiplagat (2012) researched on how internal audits promoted corporate governance in public companies and came to conclusion that audits play a great role in ensuring effective corporate governance is enhanced. So as to ensure long-term level of good corporate governance, the managers ought to offer the required support and enhance status in the role of internal audit. According to a study done by Nambiro (2014) of the Nairobi Securities

Exchange companies on the relationship that exists between profitability and corporate governance. It was found that all the companies studied had ensured the implementation of CMA guidelines on performance and corporate governance which were influenced by the use of the guidelines, size of the board, proportion of all groups of directors and the annual meetings held.

2.4.5 Consensus Orientation Practices on Performance

The third pillar of corporate governance contains consensus orientation practices which is a central pillar that requires the management to exercise agreements that ensure all resources can be accounted for (Klapper and Love, 2014). All members and stakeholders are protected through the all-inclusive approach, which also recognizes their rights. Competence, diligence, honesty, faithfulness and transparency are the factors that assist in exercising of stewardship on the resources that are entrusted upon the management are key when ensuring public disclosure of information.

Having the appropriate skills and being competent helps those entrusted with enhancing the firm performance to be able to manage the resources in a reasonable way without misusing or mishandling so that the company can realize its goals. The company can only retain its sustainability by how serious it undertakes its management of the resources given to them (Jensen, 2013).

According to Mangena and Tauringana (2015) to enhance public sector performance there is need for consensus-oriented practices. To have an effective service delivery county government there is need to have consensus oriented practices elements of the employees who are skilled and competent, operate with fairness and ensure public disclosure and transparency with the employees circle and the public.

Skills and competencies of employees are vital in ensuring performance of county government. According to Caplan (2014) measures of effective skills and competencies can be measured by if the county government management through the County Executive Committee (CEC) has resulted in fair and equitable funds-use resulting to a decrease in the

risk of fraudulent exercises, County directors work in consultation with other stakeholders and if the employees plays a valuable role in the implementation of the county strategic plan. In ensuring fairness in public sector there is need for county administrators to adopt good governance practices that include; recognizing and protecting the rights of all residents and stakeholders and ensuring funds use information is displayed publicly for all to access and question where need be. It is also important for managers to involve non-supervisory level employees through practices that offer a better understanding of the county performance mission (Vafeas and Theodorou, 2011).

Public disclosure and transparency is an act of good governance that ensures government entities performance according to Mwirichia (2013). Public disclosure and transparency should be through workforce working together to promote increased commitment from all stakeholders, the management/authority communicating what they feels should be prioritized to their subordinates, ensuring that the public understand the county’s priorities and high involvement at all work levels that leads to greater individual efficiency thus, greater overall performance.

The corporate governance procedure ought to guarantee that opportune and exact divulgence created on every physical matter related to the partnership, as well as the budgetary, financial management, possession and governance of the organization (Mullins, 2015). An organization information revelation that comprises of corporate performance divulgence and financial bookkeeping exposure is the foremost way that organizations end up noticeably straightforward to all stakeholders (Barcan, 2013). The divulgence and transparency ought to demonstrate that the presence of approaches and directions are in accordance with the laws and a controls identifying with the organization and the way of the business (Berghe and Levrau, 2014). In this way, transparency and exposure are huge and central elements of corporate governance rehearses, which implies that great divulgence is one of the practices that enhance good corporate governance. This is on account of the market may assume extra genuine data irregularity issues if an association has poor data exposure and transparency practices.

Mallette and Fowler (2012) findings show that in organizations that embrace transparency and improved disclosure, the lower the information irregularity between the company’s stakeholders and the administration. These outcomes show that firms with low transparency and disclosure are not of much value as compared to companies with greater transparency and disclosure. Strong governance practices are created by both advanced transparency and disclosure, which eventually result to sustainable performance (Sun and Kirkbride, 2014). They continued to indicate that there is positive connection that exists between performance and corporate disclosure actions. Transparency is a very vital factor in establishing corporate performance; therefore corporate transparency has a positive link with the sustainable performance of a firm (Lins and Miller, 2014).

According to Ellstrand (2016), in practice, employee skills and competence is one of the key factors of corporate governance. Moreover, a great structure of corporate governance needs great levels of disclosure of financial information to decrease information irregularity between all groups and to make sure corporate insiders are responsible for their activities (Ingley and Walt, 2013). All issues involving the organization ought to be provided accurately including the funds management, financial condition, proprietorship and administration of the company. According to Hanousek and Svejnar (2014), physical data ought to be tabled on members governing body and main employees. External tabling of material data, for example, related-party exchanges, audit reports and insider exchanges is a component of an all-around administrated firm (Glaeser, Johnson and Shleifer, 2014).

According to Gaur and Delios (2016) fairness, accountability and the nature of information given by firms are relied upon to show a positive connection with their performance, one reason being that great performers are more eager to produce information. Additionally, most recent studies (Cannella, 2014) stress on the responsibility of information in connection to productive capital allocation and development. A few ascribes are utilized to show the nature of exposure. The number of examiners' remarks in the yearly report is considered contrarily related with information quality and henceforth adversely associated with firm performance. The quantity of changes in bookkeeping approach in the course of recent years can as well be seen as obscuring accounting numbers, henceforth encouraging record controls.

Indeed, Larcker (2016) explain that the energy of profit in clarifying stock returns is weaker for firms with salary improving accounting changes. They additionally find that adjustments in accounting strategy with salary increase have negatively affected the company's resulting stock returns.

In difference, the nature of administrations through the procedure of corporate governance ought to mirror the association's regard for its stakeholder. Specifically, the time of reporting and stakeholders’ meetings held outside the most thought dates can be taken as proof of the association concern for its management specialists, which is then thought to be connected with the company's sustainable performance.

Without a doubt, Nash (2015) found that the arrival of income sooner than anticipated is related with more prominent returns. Westphal (2011) demonstrate that the stock instability of firms with early reporting is also essentially higher contrasted than firms with late reporting. These discoveries suggest that employee skills and competencies, fairness in duty execution as well as public disclosure and transparency in the operations can thus measure timely process. Evidence of the relationship of consensus orientation practices on performance is as presented by scholars in the next paragraphs in this section.

According to Hair, Black, Babin, Anderson and Tatham (2016) consensus orientation practices are the underlying principles, which show themselves in the different activities and the general direction taken by a firm. They help create the behaviour necessary for the achievement of better results. According to Green (2015), consensus orientation practice is enhanced through public practice. This is where learning is transmitted through participation by the community and not just through linear transactions. The idea of situated learning redefines learning from the acquisition of propositional knowledge to co-participation, interactions and other group processes in a community.

According to Gaventa and Gregory (2013) the idea of consensus orientation practice facilitates concept-led learning. This is key to the creation of professional knowledge. Consequently, the professional group promotes a higher order of thinking across the different constellations of practice where uncertainty is valued thus leading to creation of new

knowledge and practices. Effective boards operate as a unit and must have the ability to think and learn together as a team. Effective boards operate as self-responsible teams that maintain a group culture, which supports their work.

The quality and effectiveness of the board’s teamwork will depend on the level of trust within the group. Finch (2015) study also notes that consensus orientation practices are just a reflection of how some firms operate to ensure they achieve the desired performance.

A study by Eversole and Martin (2015) shows that consensus orientation practices by management or board performance is not as a result of board structures alone but also the direct behavior and teamwork both inside and outside the boardroom. Consensus orientation practice by the management encourages both interaction and teamwork by promoting diverse interpretations. It also promotes different values, which bring behaviour that challenges each member’s opinion thus giving forth to an alternative approach. While the management comprising of members of different backgrounds engages in debate about the organization’s objectives, consensus orientation practices help reduce conflict in an organization. In most situations, team performance exceeds that of an average individual though not necessarily that of an expert. Dalehite (2014) notes that consensus orientation practice is an elusive phenomenon. The study shows that firms employ resources so as to attain their objectives.

Cassia and Magno (2017) suggests that it is not the effectiveness of a leader in isolation which affects an organization’s performance but rather the alignment of different leaders across all levels in an organization. The consensus orientation practices adopted by an organization may either align or misalign leaders which may in-turn enhance or detract them from successfully executing their strategy. Managements are social groups and share social norms and values and these lead to bonding and cohesiveness. This is crucial for successful performance and strategic decision-making. A cohesive team culture creates the right environment necessary for information exchange. It also brings the ability to engage in constructive debate, which contributes to the long-term success of the organization.

Adèr, Mellenbergh and Hand (2014) examined four consensus orientation practices namely; entrepreneurship orientation, relationship orientation, market orientation, and technology

orientation. Entrepreneurship orientation enables a firm to compete effectively. Promoting adaptability and encouraging the firm to capitalize on opportunities as they come achieves this. Relationship orientation is important in industrial marketing for the development of inter-firm relationships. Market orientation enables a firm to understand customer needs and how to fulfill them to the best of customer satisfaction. Technology orientation often relates to product development. This is critical for the success and survival of a firm in a technology savvy industry.

Tullah (2014) posts that market orientation are conceptualized according to the market intelligence gathered by an organization with regard to its customers. It also involves the manner in which the intelligence information is distributed in an organization and how the management best respond to it. Intelligence distribution is the distribution of customer information using both horizontal and vertical channels in the organization. This can be done using both formal and informal networks. Reaction on the other hand relates to all the actions taken after the generating and disseminating market intelligence information. According to Thornhill. Lewis, Millmore and Saunders (2011) the alternatives approach considers the presence of emergency factors in the public sector and business cultures.

Sapala (2015) study suggests that firms should undertake strategic orientations based on the economic climate they do business in. The study found that while market orientation enables an organization perform, relationship orientation on the other hand is important in a regulated economy. This is because firms rely on their relationship with the public, the central government, and other national government agencies. This helps remove the uncertainties, which may interfere with firm operations and performance where laws and regulations are weak. Santiso (2011) observes that doubts may linger on the benefits of relationship orientation on the performance of an organization. There is therefore a major relationship between consensus orientation and performance across the public sector, manufacturing, retail/wholesale, and service industries. Porter-O’Grady, Hawkins and Parker (2014) argues that close relationships may not always work, as they tend to lead to mistrust and hence decreased performance when stakeholders in a firm cease to have cordial relations.

Kapopoulos and Lazaretou (2011) investigated the relationship between transparency and disclosure as corporate governance practices in connection to performance of firms in the Irish Stock Exchange. They reviewed a sample of great capital and ISE liquid firms and their transparency and disclosure marks as measured by goal access of their yearly reports and firm web sites for the addition of transparency and disclosure aspects. The organizations with greater measures, mostly in the board and management level strategies, had greater profits and measures of higher profit. The companies that also used IFRS in preparing the financial statements had a greater transparency and disclosure measures and assurance to better disclosure measures. Lastly, the results showed that there was a stronger connection between disclosure measures and performance whereas adopting IFRS earlier advanced the feeble link between transparency and disclosure measures and performance scores.

Al-Hussein and Johnson (2013) investigated the relationship between consensus orientation practices and public firms’ performance in Saudi Arabia. This was done through a descriptive research design, which targeted 21 public firms. Data was collected through questionnaires and interview guides. Data was analyzed using regression and correlation. The study found a strong relationship between the performance efficiency of the firms and consensus orientation practices.

Huang (2010) examined the effect of consensus orientation practices and government agencies performance in Taiwan. The study sampled 41 agencies. The study adopted a descriptive research design. Data was collected using online questionnaires. Data was analyzed using correlation statistics. The study found that consultations during making of major decisions in government agencies improved performance through the feeling of ownership of such decisions among the staff.

Wang and Xiao (2016) investigated the relationship between consensus orientation practices and performance of government agencies in China. They used a sample of 96 government agencies spread across the country. Data was collected using questionnaires administered to the staff and the clients. Data was analyzed using regression and correlation to identify possible relationships. The study found that consensus orientation practices improved

performance specifically through consultations during decision-making. Clients reported improved service delivery as a result of these practices. Khanna and Palepu (2015) study on emerging markets affiliated to group profit that examined the association among the Istanbul stock exchange performance and corporate governance practices with 52 firms as a sample. The study objective was to establish the relationship between the skills and competencies of the employees and market-based measures of performance. The results of the study were that firms in Turkey have more financial revelation however a lower employee who is skilled and also there exists a positive association among the public disclosure, accountability, transparency and firm’s success. To conduct the study transparency and voluntary disclosure score were utilized.

Weir and Laing (2010), study discovered the area that is organized especially in corporate governance matter, the management of law is probably not going to be at such a poor state as is generally had confidence in United Kingdom listed firms. The review was planned to answer whether better corporate governance resulted to higher shareholder assurance, impacts the share trading system and whether securities exchange improvements are identified with private capital accumulation. They inferred that with regards to India, the adjustments in the shareholder assurance law so far have no relationship with securities exchange improvements and private capital aggregation. From the sampled firms it was found that performance was ensured by recognizing and protects the rights of all stakeholders, funds use information was displayed publicly for all to access and that the management through resulted in fair and equitable funds management resulting to a decrease in the risk of fraudulent exercises.

Koh (2015) conducted a review of 200 institutional financial specialists over the world and found that investors say they would pay more for the offers of good managed organizations. The findings also found that over half of the financial specialists are of the view of corporate governance is similarly or more important for a business. Over 70% financial specialists are prepared to pay premium for a decently managed organization. 78% respondents say Corporate Governance increases long-term shareholder esteem. For 56% respondents, Governance rules have all the rules of being in any event if not more vital than budgetary

issues in stock selection. This was achieved through directors’ work in consultation with other stakeholders and the workforce worked together to promote increased commitment from all stakeholders.

Tariff (2012) investigated whether corporate governance consistence matters for firm performance, including both market-based and accounting measures of performance in the Middle East and North Africa. The study found that there was a reasonable connection amongst consistence and the market-driven measures of performance. That growing consistence was prompting expanding all out shareholder come back from the examined organizations. No confirmation of such a relationship was nevertheless found amongst consistence and the accounting measures of the company's performance capacity.

The outcomes recommending that despite the fact that consistence may not enhance association's working performance; it improves investors' impression of the governance of organizations, with the resultant effect on firm esteem. Önder (2016) carried out a study on performance effects of transparency and disclosure and boards of directors in Turkish firms. He used a sample population of 100 companies that were listed at the Turkey stock exchange in the periods between 2009 and 2013. In his study, he divided transparency in to three levels:- total transparency, three categories of transparency and disclosure and finally the twelve categories of transparency and disclosure. He used ROA and Tobin Q as funds management indicators he concludes that in the first level total transparency and disclosure is not related to any of the performance measures since there was a 10% significant level.

Transparency in the firms and disclosure affected firms in their level of investments and the opportunities they received as 5% level of significance was found. Asymmetry of information was found to be lower when the transparency and disclosure levels were found to be high through sharing of information between them, the management and shareholders and thus lower cost of capital. In the third level of transparency and disclosure accounting policy review and accounting policy details are positively related to operating performance and firm value. Haniffa and Hudaib (2015) in a study of corporate governance, this enables public organizations to center upon the improvement of their core services to additionally extend the

public-particular favourable circumstances in enhancing performance in the public projects. This prompts the advancement of competitive advantage through inside and outside organizational connections in view of shared trust. High corporate governance can create advantages in view of vital adaptability to create advantages and endeavor public-specific focal points that enhance the desired performance (Siha, 2013), which was later adopted in Dubai in 2016. The study shows that performance was enhanced by efficient communication and the input by the management played a valuable role that implemented of the targeted firms strategic plan.

Harris and Raviv (2016) conducted a study on corporate governance practices in Turkish firm and the intervening variable was transparency and disclosure. The study analysed the disclosure practices of organizations in Turkey listed on the Istanbul Stock Exchange. Turkey’s Corporate Governance Forum, their standards and poor governance looked and assessed the reaction to control and the market conditions by directing the review more than three progressive years with the goal of giving a near understanding into the divulgence practices of Turkish organizations. As indicated in this study, laws and regulations of corporate governance and their authorization have been definitely enhanced recently.

The new lawful and administrative system incorporates corporate governance guidelines, which were issued in the year 2013, mandates identified with review and accounting values and practices issued in and after 2013 by the Capital Markets Board of Turkey and orders issued by the Banking Regulatory and Supervisory Agency. Joh (2014) studied the disclosures extent of banking companies’ annual reports in Korea. The study objective was to establish the disclosure level for both voluntary as well as mandatory carried out in banks. The findings revealed that banks complied with the regulations related to the mandatory disclosure but are far behind in disclosing items that are voluntary.

It was also noted that employee skills and competencies was significant in explaining the level of disclosure while fairness as a practice was not significant in explaining the firm’s performance of the firms studied. Findings show that there was high involvement at all work levels that lead to greater individual efficiency thus, greater overall performance, managers

involved non-supervisory level employees through practices that offered a better understanding of the firm’s performance mission and the management ensured that the public understood the firm’s priorities.

Grossman and Hart (2014) on evaluating the costs and benefits of ownership and specifically focused on corporate governance practices score to operating sustainable performance management for the Karachi telephone service firms. They based their research findings on five firms out of seven firms that were listed on the stock exchange. They found a positive correlation between the practices, which found to be statistically significant on performance. The study concluded that performance was positively related to most of the governance categories they considered and the relationship was significant. Nyokabi (2016) carried out a study on transparency and disclosure of risk information in the Kenyan banking industry during the period between 2009 and 2014.

She carried out a census with only 22 respondents and concluded that corporate governance practices had a significant influence on the performance of the banks. Practice was measured on the basis of transparency including improved management and board credibility and improved investor confidence thus welcoming more investments and consequently improved performance. Miniga (2015) did a study on the performance of Regulatory State Corporations in Kenya to find out the relationship that exists between their sustainable performance capacity and corporate governance. The corporate governance practices included employee skills and fairness in service administration. The researcher used a descriptive correlation research design to connect corporate governance and performance and find out the relationship that exists between them.

In the work of Muriithi (2015) on state corporation’s financial performance and corporate governance with a basis of New KCC revealed that the board adopted good governance practices that are revised and enhanced over time and resulted to an enhanced success. Various practices of corporate governance that were identified were; skill and competence of the employees, commercial communication, and board performance assessment, stakeholders’ responsibility, social and environmental responsibility. Okwiri (2016) studied

the determinants of Kenyan companies in the yearly reports on voluntary disclosure. The general and strategized, capital, looking forward and information from the board were the factors that the study accessed that were linked to voluntary disclosure for Kenya from the year 2012-2015. The main theory outlined in the study was the transaction cost theory.

A disclosure index was constructed and ordinary least square method used. The findings were that protection of stakeholders’ rights ethics applied and communication procedures influenced business performance capacity.

Onyango (2014) studied the association between the performance and corporate governance practices. The sample included eighteen Kenyan regulatory state corporations. Both secondary and primary data were composed in the data set.

Corporate governance practices were assessed of inclusiveness on performance of public services. This was a case study conducted in the new KCC sought to establish whether there was any association among the process of corporate governance and the state corporations’ success. He focused on the role of Board of Directors in state corporation leadership which also has a mandate of overseeing the running of the corporation.

It was revealed that good corporate governance inclusiveness was adopted by New Kenya Cooperative Creameries Board which were studied as well as being enhanced over time and had resulted into enhanced performance.

2.4.6 Stakeholders Participation on Performance

Stakeholder’s participation links the three aspects and requires responsible leaders as well as the beneficiaries with a capability and competence of steering the firm to better heights. They have an ability of providing an enabling environment through which the citizens are able exercise their oversight functions and contribute innovative solutions to shared problems (Reenen, 2011). Accordingly, Boyd (2015) posits that the corporate governance structure ought to perceive the privileges of stakeholders set up by law or through common understanding and support dynamic collaboration amongst companies and stakeholders in making riches, occupations and the manageability of financially stable enterprises. 85

According to Kapopoulos and Lazaretou (2011) stakeholders’ participation is vital in ensuring performance of a public entity. Mechanisms and control of the daily operations are vital and this is done through stakeholder’s participation. The enhancement of participation is by ensuring members of the public are provided with a platform to exercise their oversight functions, ensuring innovative solutions are shared in solving development challenges and by ensuring that both individuals and groups of people are given responsibilities to that will enhance the success of identified projects.

Tamer (2015) highlights oversight functions by stakeholders enhances public sector performance. The study show that members of the public in budgeting gives strategic insight on what needs attention with priorities. This is by ensuring effective communication to ensure the public understands the set point of action. To ensure that the members of the public participate fully in development then there is need therefore to conduct civic education units to educate citizens on their rights in the area development. Tan (2012) further points out that there should be consultations on issues affecting project performance in the county.

Project monitoring and evaluation by stakeholders also ensures performance of the county government according to Kapopoulos and Lazaretou (2011). The county administration should ensure that stakeholders who include the members of the public, investors, national government and other interested parties are encouraged to participate in the county development plans. Thus, Farrar (2008) posits that implementation, monitoring and evaluation of county operations are a collective responsibility that involves all stakeholders. A study by Du Plessis et al., (2011) on stakeholder’s participation on performance of public sector found a positive significant relationship between Stakeholder’s participation the two factors. The factors that were highly correlated with the effects were control mechanism by stakeholders and their influence to monitor and evaluate public projects.

Corporate governance has gotten more stress both in action and in academic research. This stress is expected, to some extent, to the pervasiveness of exceptionally exposed and deplorable financial revealing frauds, for example, Enron, WorldCom, Aldelphia, and Parmalat, a remarkable number of profit repetitions and cases of obtrusive income control by

corporate administration (Knoeber, 2014). Further, academic research has discovered a relationship between limitations in governance subsequently of stakeholders none inclusion and poor public funds management, income control, financial explanation extortion, and weaker inside controls (Schoorman and Donaldson, 2011).

Given these advancements, there has been stress on the need to enhance corporate governance through shareholders’ association over the budgetary detailing process, Sloan and Sweeney (2014), for example, sanctioning changes to enhance the viability of the review advisory group and to make the top managerial staff and administration more responsible for guaranteeing sustainable performance and also a quick growth of research on corporate governance.

Additionally, the main concern the corporate governance has is how successfully various governance structures govern the association with different stakeholders (Sarkar, 2013). Motwani and Klein (2016) found that the stakeholder ideal of corporate governance is much useful to the developing states, as following the interest may aid to deal with the failure of markets in the economies of the developed states. Dirk and Achterbergh (2011) looked at the conservative stakeholder theory of corporate governance, which sees a company as a nexus bond of agreements with various stakeholders, and they marked that the company’s goal ought to reduce the interests of all shareholders. The outcomes recommend that study players take a great view of the corporate governance ideal, with respect of a great range of shareholders evident.

Patibandla (2016) contend that institutional speculators require the corporate governance of an organization on the grounds that the institutional financial specialists have their essential trustee obligation regarding their own speculators and recipients, which can prompt to irreconcilable circumstance with their going about as proprietors. For example, Berger and Udell (2015) contend that non-appearance of fitting impetuses and free rider issues impede institutional activism endeavors. Some current research, though, demonstrates that organizations with great administration structure have really created hazard balanced abundance returns for their shareholders and thus, if an institutional financial specialist puts

resources into organizations with great corporate governance records, it will really help its own shareholders. The main goal of the firm, according to the shareholder theory, is to increase shareholders profit through effective allocation process and massive proficiency that is; to increase benefits in the firm (Monks and Minnow, 2015).

The method in which achieving sustainable performance is ruled upon is just the market esteem or the shareholders’ esteem of the firm. In this manner, the shareholders’ interests are expected to be obliged by the enterprise as an expansion that is legitimate according to this outlook. The use of free markets, effectiveness in finances and implication of profits have been advocated in the past decade as a way shareholders use to deal with their properties and the company important operator relationship emerging from the partition of gainful possession and official basic leadership. This partition makes the company's conduct separate from the benefit-boosting perfect. This happens in light of the fact that the premiums and goals of the important (the speculators) and the specialist (the chiefs) vary when there is a division of possession and control. Since the administrators are not the proprietors of the firm, they do not bear the full expenses or receive the full rewards of their activities (Mansur, 2016).

Every organization should ensure that it delivers its products and services according to its policy and they should be according to the market rule as shareholders benefits need to also be created in market share, or a connection to specific speculation ventures, and so on. The execution stage is the place all the calculated exercises are accomplished. These strategic decisions regarding corporate governance are inclusiveness, effective regulatory body and consensus orientation, and the extent of stakeholder’s participation in the county’s endeavours which are their strengths, and in addition chances and dangers, which are the outside powers (Fong, 2010). These were reviewed and continuously improved, which led to better performance. From the above review, none of the studies evaluate inclusiveness, regulatory bodies, consensus orientation practices and stakeholder’s participation on performance in county governments in Kenya. Observation is vital at this phase to guarantee that the venture is actualized according to plan (Vishny, 2011).

The primary role of a regulatory body is to provide entrepreneurial authority for the company using reasonable and viable controls and structures that allow the oversight and evaluation of risks. Principles that are the public organization important points enable vital departments such as finance and human resource meet their goals and audit administration of funds management. The set rules also set the organizations’ values and standards and allow the public organization obligations to its stakeholders to be understood and achieved. Each of the directors must make decisions directed by the set rules objectively in the interests of the organization. This phase guarantees tasks' exercises are legitimately performed and controlled (Korczak and Korczak, 2013). The calculated answer is actualized to take care of the issue determined in the venture's needs. The well-known devices or systems utilized as a part of the usage stage are a refresh of Risk Analysis and Score Cards, as well as venture Plan and Milestones Reviews. Usage stage comprises of the procedures used to finish the work characterized in the venture administration plan and fulfils the venture's needs.

The process of execution which pertains inclusiveness, is a process and ought to be controlled to make sure suitable and correct revelation of information to the stakeholders which creates one of the measures of good governance in everyday business environment plan (Shin and Stulz, 2010).

Clearer direction and expanded motivating forces for program supervisors are consequently required if these activities are to be mainstreamed in contributor organizations (Punch, 2016). Nation programming could concentrate more on conveying advantages to poor people and real outcomes ought to be checked. Most venture supervisors, therefore, require a more extensive scope of poverty-pertinent skills to migrate them in the field, with the expert and adaptability to develop master-poor associations through negotiation. A good venture usage is necessary. An individual or group of individuals ought to be offered duty to drive achievement in venture execution (Ntoiti, 2013).

To begin with, extension ought to be built up and controlled. The degree must be obviously characterized and be restricted. This incorporates the measure of the structures actualized and measure of activities process reengineering required. Any proposed changes ought to be

assessed against ventures benefits and, further, executed at a later stage. Also, scope development demands should be surveyed as far as the extra time and cost of proposed changes (Mankins and Rogers, 2015). Donaldson and Lorsch (2013) argued that institutional speculators by virtue of their vast stockholdings would have more prominent motivators to screen corporate performance since they get more prominent advantages from checking. Palia and Lichtenberg (2010) contend that some institutional speculators, for example, benefit assets may have a larger number of motivators to screen than others and go about as more forceful shareholder activists.

Different reviews locate that institutional financial specialists require not assuming a part in the corporate governance structure of an organization. A few reviews demonstrate that the institutional financial specialists must meddle in the corporate governance structure of an organization. The outcomes of these reviews demonstrate that if the corporate governance structure in the organizations succeeds, at that point the institutional speculators must assume a dynamic part in the whole procedure. For instance, a study by Tariff (2012) was conducted to evaluate the stakeholder’s role in performance of Yemen county governments. The study used a case study approach where Tihama was targeted. The study found that civic education units have been established for educating citizens on their rights in county development, the county encourages investors’ participation in development plans and that the County Government ensures effective communication aimed at improving public understands the firms’ next point of action.

The study concluded that there were consultations on issues affecting project performance in the county, implementation of new projects was a collective responsibility that involves all stakeholders, the county government ensured that both individuals and groups of people were given responsibilities to ensure the success of identified projects within the county and that monitoring of county operations was a collective responsibility that involved all stakeholders.

In a current meta-examination of corporate governance study by Sulong and Nor (2010) on corporate governance instruments and firm valuation in Malaysian listed firms found that the average basic markers used as a part of scholarly research and institutional rating

administrations have extremely restricted capacity to clarify administrative conduct and organizational performance. Therefore, the findings suggested that a more extensive structure ought to consider every single real stakeholder in the governance mosaic, including those in and out of the firm. For example, the inspector assumes a huge part in observing budgetary report quality and subsequently can be seen as an imperative member in the governance procedure.

According to Page (2015) stakeholders’ participation may occur at any stage in the public sector operations as follows; in project design, in project planning, and through the mobilization of resources. In other words, there is chance for stakeholders to participate in public sector operations through planning, need analysis, implementation and monitoring, and evaluation. As a matter of fact, participation ought to involve all people in the public sector in the share of development benefits, the implementation and evaluation of firm performance.

Stakeholders are also in a position to define the goals, objectives and the general direction to approach firm operations (Oso and Onen, 2011). The empirical evidence on the impact of stakeholders’ participation and devolution shows mixed results and is in some cases inconclusive.

A study by O'Leary (2015) suggests that stakeholder participation in decentralization process promotes government response to service delivery especially at the local level. Another study by Navarra and Cornford (2015) indicates that stakeholder participation in the devolution process could eliminate inequalities in resource allocation among the firms. The study also finds that local officials tend to have little or no authority at all when it comes to influencing service delivery. At the same time, the influence of citizens is hampered by the availability of limited information or lack of information at all. This means that devolution is yet to achieve the desired result of effectiveness in resource mobilization and allocation.

Shackleton (2002) suggests that arguments for or against devolution are just but mere rhetoric. The findings caution that it is difficult to identify a specific political climate that would yield the same result for all the devolved units. Devolution can also lead to unfulfilled

expectations among the public hence creating problems. In some instances, the devolution of both administrative responsibilities and legal powers has left some regions either ill equipped or ill prepared to meet the demands placed on them by the citizens.

According to Muriu (2012), devolution may facilitate the elite capture of local governments by the elite. This creates a patron-client relationship (patronage) especially where stakeholder participation is absent. If the rules and systems governing devolution are poorly designed, the risk that politicians could use the resources available to them to perpetuate themselves in power is real.

Melkers and Thomas (2014) observes that it is generally better if stakeholder participation is adopted in the early stages of project planning so as to analyze any successive increments in project cost or the various phases. This way, any small increment in project costs can be judged on its own merit. Just like a product follows its life cycle, a project should follow a life cycle with certain phases of development. Project managers should also consider dividing big projects into small manageable units, which could make it easier to manage it. Stakeholder involvement in the planning process helps reduce the mistrust in the project process or its outcome. It also increases the stakeholders’ commitment to the project hence giving it more credibility.

The Michels and de Graaf (2012) study on the harmonization of devolution systems sought to know the effect of the existence of multiple government funds and the duplication of roles with regard to stakeholder participation. The study established that these have largely prevented citizens from engaging in local governance. Citizens tend to get confused by the existing overlaps between the many agencies carrying out government functions. This makes it difficult for them to grasp all the processes involved in the administration of public funds. These overlaps also make it difficult for citizens to monitor and evaluate the performance of their government.

The study suggests that effective citizen participation can only be achieved if there is harmonization of all funds into a single kitty under the management of firms and that stakeholder participation should be enhanced. According to Marchington and Wilskinson

(2015), institutions that used the stakeholder participatory approach in youth involvement had better chances of succeeding as opposed to those that did not. On the other hand there are challenges of managing stakeholders and the impact of such challenges on the management of a project. The Leeuwis (2014) study shows that stakeholders include the firm executive and the community (public). They are expected to be involved in the implementation of all the approved projects. This is to ensure that the projects are completed using the resources allocated to them and within the given time framework i.e. completion must be within the set deadline. In addition, there are constitutional policies that govern how stakeholders should participate in the monitoring of projects. Khwaja (2014) posits that participation in projects’ control seeks to respect the views, voices, preferences and decisions of the less powerful and most affected stakeholders. There are many challenges in setting up and implementing projects hence the need for stakeholder participation.

This is to ensure that any deviation is corrected and feedback given for any necessary changes. However, the study by Kanyinga (2014) conducted on the effectiveness of the implementation of firm-based performance policies shows that lack of community participation in the implementation process reduces efficiency.

According Jones, Stasiowski, Simons, Boyd and Lucas (2013) the purpose of project control is to define its output, outcome and impact as well as performance indicators and targets. The stakeholders should apply the firm project control framework. This is to ensure that the intended outcome of the firm project is achieved in the short-, medium- and long-term. The Clench and Harris (2014) study shows that although firm performance is distinguishable with project management and performance, success can only be achieved through stakeholder involvement in the monitoring process. If a firm is not performing, neither will its projects, according to Irvin and John (2014). The three dimensions of budget, specifications and time, define the success of any project management. However, these factors are not enough measure of the firm’s performance. Other factors such as the satisfaction of stakeholder expectations and the quality of management are also important.

Hope and Chikulo (2016) points that in firm operations, stakeholders’ perception is crucial. If the perception is negative, it can severely obstruct a project’s implementation. This can result into cost overruns and the exceeding of time schedules due to conflicts and controversies. Stakeholders do bring a wide range of knowledge, experience and skills, and can thus help to make the project a success (Grindle, 2014). The non-inclusion or lack of involvement by stakeholders in project management has led to many a project failing. However, criticism against stakeholder participation has been increasing in the recent years.

Fox (2014) notes the risks brought about by the participation of people with different views and conflicting interests. This tends to slow down the decision-making process in the project. The assumption that stakeholder participation helps improve the legitimacy of decision- making has also been questioned. Powerless people may not have the ability to participate fully and thus decisions made in participatory processes may become biased against them. Fiszbein and Ringold (2011) show that programmes and projects are guided by planning principles and operational concepts with key participants playing a major role in effecting the entire process. Raffo, O’Connor, Lovatt and Banks (2016) describe how in a Swedish water company, water users blocked in an effort to avoid incurring heavy costs. Stakeholder participation also tends to reduce the accuracy of decisions made by the management. This is because it tends to dilute the impact of science on decisions made by the management. The respective principles define what programmes and projects are and indicate the importance of a quality programme and project team in overcoming technical problems. They also emphasize the importance of vertical communication between the programme and project managers on clear objectives and constraints. This stresses the need to involve key stakeholders in the decision making process. It also shows the essence of funding and staffing the project.

Okiiya, Kisiangani and Oparanya (2015) observe that any failure relates to a stakeholder’s perception of the value the project and his/her relationship with other stakeholders. The key to success in a project is in understanding that different stakeholders have different definitions of project success and different expectations.

A project’s success or failure is therefore measured by how well it meets stakeholder perceptions and expectations (Greenwood, 2003). Stakeholder perceptions and expectations can be positively influenced by the project manager’s willingness and ability to engage effectively with all stakeholders.

Marriott and Marriott (2015) did a study on stakeholder involvement in the integrated water resource management in community water projects at the firm level. The study analyzed the involvement of youth in water resource management. It compared the results of the different methodologies used. The study established that institutions that used the stakeholder participatory approach in youth involvement had better chances of succeeding as opposed to those that did not. Kyereboah and Biekpe (2017) on the other hand examined the challenges of managing stakeholders and the impact of such challenges on the management of a project. The study found that the interests and roles of the key stakeholders were very critical to the operations. However, stakeholder management was found to be characterized by casual and ad-hoc actions and was predominantly not institutionalized. The following challenges were identified as those affecting the working of organizations; conflicting interests, poor commitment, unhealthy competition, limited interest, anti-stakeholder attitude by the management, entrenched positions, beliefs and practices, and lack of understanding and appreciation.

Her, Ku and Jing (2012) carried out a study on stakeholder Involvement and sustainability as related to the performance of firm projects. The study focused on stakeholder involvement with the aim of improving firm project performance by achieving sustainability. The ideal of man in corporate governance is established on the fact that the management decides on the wellbeing of the public, ensuring that collectivist choices are put above own choices. Doing the right thing for the public encourages these types of people, as they believe that they will benefit at the end when the public needs are satisfied.

ANOVA revealed the variation of the perception of participant’s roles and the firm strategic focus towards stakeholder involvement, sustainability and firm project performance. Based on the findings, a conceptual framework was set out which underlined the importance of

stakeholder involvement in the improvement of firm project performance. This derived framework demonstrated that such involvement could be valuable in anticipating the expectations of the different stakeholders.

Harry (2017) investigates the influence of stakeholders on the performance of firm projects. The results of the research show that project managers consider most of the stakeholder analysis and involvement methods as effective.

The method chosen in each case depends on the stakeholders and project characteristics. Fernandes (2015) observes that stakeholders are either individuals or organizations involved in a project or those whose interest may be affected by the project. They therefore tend to exert influence over the project. Stakeholders are therefore those people or organizations with a stake in the project. The stake could be a right, an interest, or ownership. Rights can either be legal or moral ownership in a circumstance.

According to Dyer and Ross (2014), any deficiencies identified by stakeholders should be noted and recommendations made on how to fix them. To reach a broad consensus, consultation is required from all the stakeholders. This consensus ensures prudent and sustainability of planned processes within an organization. Fourth element is inclusiveness. Institutions that ensure fairness and guide their stakeholders in decision-making have a high chance of maintaining and enhancing effective corporate governance. The sixth element is effectiveness and efficiency, which is the end result of any organization’s goal (Finlay, 2016).

Stakeholders have been classified so as to understand the importance each stakeholder to the project. A stakeholder can be a consumer or a buyer. One model categorizes stakeholders based on assessing the relationship of the stakeholder to the project.

According to Enserink and Monnikhof (2013) donor agencies are yet other stakeholders that are involved in the performance of emission control projects. Donor agencies have the mission of funding the project, monitoring and evaluation. They must therefore make sure that the project goes all the way to completion. Governments too are an important part of

stakeholders. Governments ensure that both jobs and tax revenues are stable and maintained. It is for this reason that governments are willing to bail out huge organizations in times of financial crises (Devas and Grant, 2011).

Stakeholder involvement in project planning activities involves; identification of the project objective, allocation and determination of the method to be used to deliver the project, and the specification of the resources required. The benefits of stakeholder involvement in the project planning include the reduction of mistrust in the project and the increase the commitment by the public to the project. This helps to improve the project credibility in the eyes of the public.

Cassia and Magno (2016) studied the relationship between stakeholder involvement in project planning and the effect on project performance. They concluded that stakeholder involvement impacts directly on project goals, resource allocation and planning decisions and hence on the overall performance. Brandsen and Pestoff (2016) argue that stakeholder involvement in planning involves; selecting the planning team, developing the scope statement, identifying deliverables, risk planning, engaging stakeholders in determining how to plan, estimating time and cost for activities, networking the activities in their logical sequence, developing the budget, creating the work breakdown structure, estimating the resource requirements for the activities, developing the schedule, identifying the activities needed to complete those deliverables, and gaining the formal approval to begin work (Gumende and Dipholo, 2014).

Most of the county governments have facilitated the sharing of vision between people in governance positions and citizens of that particular county (Thompson & Martin, 2015). The county government has improved the societal confidence of many of its citizens that are part of the governance process. In the spirit of devolution, the Kenyan constitution has allocated 25% of the total revenue to the development of the counties, which has been assigned, to the governors who are the county managers. According to Kluska, Laschinger-Spence and Kerr (2014), stakeholder involvement in project implementation is required so as to transform the planned project objectives and policies into reality. Stakeholder involvement in

implementation is an important exercise in project management. The implementation of a project helps to coordinate people and the resources necessary to undertake it. The District Works Officer who is a Government official assists in preparation of bill of quantity for the project. The other relevant departmental heads approve the budget and work plan for the projects in their relevant fields. The objectives of engaging stakeholders in planning include analyzing, anticipating, scheduling, coordinating, controlling and Information management, which influence the success of the project.

Kelly (2016) in his analysis focuses on organizational issues, which play a crucial role in project outcome. Stakeholder involvement is an element of the organization’s ability in dealing with stakeholder decision-making and project performance. The study found that effective decision-making through involvement of stakeholders does affect an organization’s project performance. Participatory monitoring by stakeholders tends to strengthen the relationship between the project and its stakeholders (Isoe, 2014). The stakeholder identifies and creates groups referred to as the stakeholders of an organization describing and recommending ways in which administrators can recognize and be guided by the interests of concerned groups. It caters for the internal and external stakeholders of the organization. Internal includes the employees, managers and owners of the organization, whereas the external stakeholders include society at large, Government, creditors, stakeholders, suppliers and customers, trade associations and competitors.

According to Innes and Booher (2014), every organization should ensure that it delivers its products and services according to its policy and they should be according to the market rule, as shareholders benefits need to also be created. Stakeholders according to the stakeholder theory do not essentially own the business enterprise, as it does not support this factor. All the workers, clients, providers, and the locals should be served equally by the enterprise either singularly or collectively.

The principle of free market is greatly upheld by the shareholder theory together with issues concerning free riders, moral dangers, and imposing business model power which the government comes to support the free market factor at large Gates, Jacobson, Degener and

Purcell (2016). From this literature, it can be deduced that the success of any project ultimately depends on the ability to win the support of its stakeholders. Stakeholder satisfaction can help to ensure firm performance and ultimately contribute significantly to the country’s economic success.

An interview study by Mandaci and Gumus (2010) targeting companies in Turkey, internal auditors uncovered that administration hosts a huge impact over these groups. A portion of the reviewers in that review contends that an administration cannot be governed if it lacks the desire to. Further, an administration may put passive, agreeable individuals on the board that may fulfill administrative necessities, however, are hesitant to test the administration.

The findings demonstrate that the organizations had to pay board of trustees that reliably granted over the top rewards to administration despite the associations’ moderately sub-par performance. The discoveries demonstrate that different performers and systems are to a great extent to the partnership, additionally it impacts powerfully, governance in huge ways and are fundamental to protecting the enthusiasm of an organization's stakeholders. Cases of such components incorporate, however, are not restricted to, controllers, administrators, financial investigators, stock trades, courts and the lawful framework, and the stockholders. In addition to improving firm performance as a result of stakeholders’ involvement, Oxelheim and Randøy (2013) on the impact of foreign board membership on firm value. The study highlights that much research has investigated the effect of stakeholders’ involvement on corporate governance in Israel.

The findings show that there was a linkage between stakeholders’ involvement and company performance. Of note was the stakeholders’ involvement in monitoring and evaluation of the projects established by the companies sampled. Stakeholders’ involvement further led to a higher level of governance quality, early detection of fraudulent financial reporting and further transparency was increased as a result of corporate governance.

Kosehun (2014) sought to find out the influence of stakeholder participation in government projects in India. He identified nine projects in Mumbai. Data was collected using questionnaires and interviews. Data was analyzed using correlation.

The study found that full participation of stakeholders in both the design and implementation of projects is the key to their success. Stakeholder participation through stakeholder analysis in the design phase gives local people control over how project activities affect their lives, which is essential for sustainability.

A study by Shleifer and Vishny (2015) in Yugoslavia manufacturing firms point out that stakeholder’s involvement as an element of corporate governance gives top notch accounting information in the commercial center ensuring tenable financial records. The study findings additionally demonstrate that the impact of governance systems on financial information quality had a positive solid connection between firm structure and the financial revealing nature of firms. Mangena and Tauringana (2015) conducted a study in Zimbabwe health sector. The findings show that there is a major connection between corporate governance and cost of value capital. They found that organizations with more grounded governance decrease the cost of value capital through a diminishment in office issues and data asymmetry and subsequently of stakeholders’ association. This finds that great corporate governance prompts a lower level of data asymmetry, in this way enhancing financial specialist trust in the revealed information on accounting.

A study by Meek, Roberts and Gray (2011) on the factors influencing voluntary annual report disclosures by the US, the UK and continental European multinational corporations found that in auditing, corporate governance mechanisms such as stakeholder involvement helps to create proficiency and avoid extortion, and improve the nature of interior reviews and raise their individuality. This, at that point, decreases the desire gap between the review and the shareholders.

The conclusion of the study finds that solid corporate governance improves the nature of the financial process and subsequently influences reviewers’ choices. The end result shows significant influence between stakeholder involvement and performance of the multinational corporations. The study by Busiinge (2012) sought to find out the effect of stakeholder participation on the performance of government projects in Kampala, Uganda. The study sampled 13 projects that were publicly funded. He conducted interviews and administered

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questionnaires to collect data. Data was analyzed using regression. The study found that where the government fully involves the beneficiary communities in its projects, such projects were more likely to succeed and have the intended impact on the communities. He also noted that imposing projects on communities was counterproductive because they know the kind that is beneficial to them.

Most of the studies show there is a link between corporate governance and performance of organizations. This study’s findings try to elaborate further on the positive link between corporate governance and performance. The study concluded that good corporate governance improved performance and ensures access to outside capital is enabled thus makes economic development sustainable. This, therefore, indicts that corporate performance ought to be measured according to the level of satisfaction of all shareholders in a company. This thus shows that corporate governance is responsible to most of the stakeholders including shareholders (managers, employees, customers, suppliers, labor unions, and providers of finance, regulators and the community) (Megginson and Netter, 2015).

The study recommended that members of the public be provided with a platform to exercise their oversight functions, innovative solutions are as a result of stakeholder involvement to share in solving development challenges facing the company and that stakeholders were involved in budgeting.

Locally, Miring’u and Muoria (2011) examined how corporate governance affects performance in commercial state corporations in Kenya. The results were based on a sample of 30 respondents out of 41 commercial state corporations. The findings were that the board estimate mean for the sample was observed to be ten while at least three outside directors are required. The study revealed that there was a positive relation between Return on Equity and board size and board pieces of all state corporations.

Githinji (2013) sought to find out the factors that affect the sustainability of government projects in Kitui County. He carried out a case study. Data was collected through questionnaires and interviews. Data was analyzed using regression and correlation analysis. The study found that participation of the stakeholders in the project influences the success of

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the development projects; when stakeholders are involved at the initial stages to up to a point when they can manage the project themselves; the project is more likely to perform better.

2.4.7 Political Environment Moderating Effect on Corporate Governance and Performance of Governments

In a study to evaluate whether political environment had a moderating effect on corporate governance and performance of governments, Lindsey (2014) evaluated service delivery among federal governments in Germany during the electioneering period. He targeted the federal government staff.

The study used descriptive research design. The study used questionnaires to collect data to find out whether there was client satisfaction and commitment by the staff. Data was analyzed using linear regression analysis. The study found no moderating effect of the political environment on the performance of the federal governments, as there was no difference in service delivery among the staff during and after elections.

To test the moderating effect of political environment on corporate governance and performance of governments in Nigeria, Adeyemo (2014) evaluated service delivery among regional governments. The study used correlational statistics to compare service delivery among elected officials in an election year and after the elections. The study used descriptive research design.

The study used questionnaires to collect data to find out whether there was satisfaction among the public with the services provided before and after elections. Data was analyzed using linear regression analysis. The study found that during the electioneering period service delivery by the regional government staff was negatively affected compared to normal times. This was attributed to the uncertainty as to whether such staff would be retained in the next government. The clients reported that they were less satisfied with the services during the electioneering period compared to ordinary times. Merkeley (2015) studied the moderating effect of political environment on corporate governance and performance of governments in the USA. He evaluated service delivery among federal governments during the electioneering

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period. He targeted the federal government staff. The study used descriptive research design. The study used questionnaires to collect data to find out whether there was client satisfaction and commitment by the civil servants. Data was analyzed using correlational analysis to compare service delivery before and after the period. The study found no moderating effect of the political environment on the performance of federal governments.

2.5 Chapter Summary

The first section of this chapter contains the theoretical review of the study. Four theories have been adopted in comparison with other theories on governance were found to be the most efficient as they contain the combination of all aspects of corporate governance that intend to advance firm performance. Though theoretically analyzed, this argument ought to be analyzed empirically. Consequently, the empirical analysis of this study sheds light to the theoretical examination. The theoretical examination is used to give the actual information on the speculations made to the exact investigation. The dissertation and theoretical legitimization are the establishment of the decision of each corporate governance aspect, and examinable speculations are produced from these factors.

To note also most of the studies done locally have considered corporate governance in its totality for instance they have mainly focused on private entities and companies leaving a research gap on public institutions. In their studies, corporate governance is reviewed as a whole, this study sought to research on four aspects of corporate governance, which are equity and inactiveness, regulatory body functions, consensus orientation practices and stakeholder’s participation on performance. Further the study evaluated the moderating effect of government policies on corporate governance and performance.

This study therefore sought to find out corporate governance (with respect to inclusiveness process, regulatory body functions, and consensus orientation practices and stakeholders participation) and performance of county governments in Kenya. The next chapter presents the study research methodology.

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CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

Chapter three is a discussion on the study’s methods and describes the philosophy of the research where the research was contextualized, research design, population as well as the sampling design. The section on methods of data collection follows then research procedures and how analysis of data was done. The section concludes with a chapter summary.

3.2 Research Philosophy

This study adopted a positivist research philosophy. Truth and objective reality are established through positivism, which is the one, and only way it can be established scientifically which is also called logical positivism. True knowledge according to positivism can only be found through science. The social world is only investigated through methods, techniques and procedures that hold science naturally (Cooper and Schindler, 2013).

Kibua and Mwabu (2016) used metaphysics or theology to distinguish between empirical knowledge and knowledge as sought in his study; metaphysical speculation when not deprived, represented truth more compared to scientific knowledge. Kotler (2010) opined that this philosophy is established on information from positive confirmation of know experience instead of introspection or intuition. This study therefore applied this philosophy to evaluate the corporate governance effect on county governments’ performance in Kenya in relation to positivist research philosophy.

3.3 Research Design

This is the manner in which a study is designed, is what Cooper and Schindler (2013) termed as a research design. To ensure triangulation different methods and designs were used. According to Nyororo (2006), triangulation is used to increase the wider and deep understanding of the study phenomenon by enhancing the study accuracy.

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Both explanatory and descriptive cross-sectional survey design were used. Basis for explanatory design is that through probability sampling biasing is reduced as well as increase in the data collected reliability. Descriptive cross-sectional survey design helps explain and establish association among the variables.

Other scholars (Ndonga, 2016 and; Kibua and Mwabu, 2016) have utilized cross-sectional survey and viewed it suitable and dependable to examine same studies. This method was multipurpose because corporate governance in strategic leadership and performance of the firm is a nonconcrete concept that was best studied using a survey.

3.4 Population

A collection of items, objects, subjects or individuals that forms the source of a sample is referred to as a population (Kadam and Bhalero, 2010). The unit of analysis was the 47 county governments in Kenya and was drawn from the Auditor General report (GoK, 2016) as presented in Appendix V. The unit of observation was 3,058 county officials who included; Governors, Deputy Governors, County Ministers, County Secretaries, Deputy County Secretaries and Members of County Assembly (MCAs).

Table 3.1: Target population distribution d Number Percentage Governors 47 1.5 Deputy Governors 47 1.5 County ministers 648 21.2 County secretaries 47 1.5 Deputy County secretaries 47 1.5 MCAs 2,222 72.7 Total 3,058 100 Source: Human Resource Ministry of Devolution & National Planning (2017)

3.5 Sampling Design

3.5.1 Sampling Frame

Officer responsible for Human Resource administration in every district gave it by use of inscribed authorization carrying out the study. This sampling frame assisted the investigator

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to draw a sensibly sufficient sample, in which all individuals from the interested population had an equal shot of being chosen.

3.5.2 Sampling Technique

Population that represents the actual targeted population is what Mugenda and Mugenda (2009) term as a sample population. The Israel (2000) formula was adopted for this study. A confidence level of 95% was adopted.

n = = (.)

n = 354 Where n = Sample size N = Population e = Significance level

As per Yin (2003), a sample of 300 guarantee sufficient data that allows bivariate and multivariate analysis measures of performance measures. A sample of 354 was arrived at for this study. The study adopted stratified random sampling for the counties so as to have a representative sample. The strata arrived was 5 Governors, 5 Deputy Governors, 75 County ministers, 5 County secretaries, 5 Deputy County secretaries and 257 MCAs.

The scholar utilized simple random sampling technique for selection of the sample for the study. This indicates that there is an equal chance of selection for each individual within each target population strata. The population was categorized into strata and then simple random sampling technique was applied in each stratum within.

3.5.3 Sample Size

Table 3.2 shows the sample distribution.

Table 3.2: Sample Distribution Category Number Total

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Governors 47 5 Deputy Governors 47 5 County ministers 648 75 County secretaries 47 5 Deputy County secretaries 47 5 MCAs 2,222 257 Total 3,058 354 * Stratified random sampling was used in adjusting the context in accordance.

3.6 Data Collection Methods

Questionnaires were used in data collection of the study, which were distributed to staff members in the county as study participants. The questions were designed to test hypothesis and provide answers to specific objectives with qualitative questions included to allow participants provide detailed explanation on their responses where applicable (Mugenda and Mugenda, 2009). The data was collected using questionnaires on the dependent variable performance.

The questionnaire was divided into seven (7) parts: Section A captured the demographic information; Section B was on inclusiveness process. The third (section C) solicit information on regulatory body. Section D and E which are the 4th and 5th section contain questions on consensus orientation practices and stakeholder’s participation respectively while the 6th section (F) sought information on the moderating factors which are political environment and eighth section (G) was on the counties’ performance.

3.7 Research Procedures

The researcher sought a research permit from the National Council for Science and Technology (NCST). The University also gave an introduction letter. The researcher also sought the data collection authority from county governments. Thereafter, the researcher recruited research assistants to aid in collection of data. In data collection, the drop and pick later method was applied by the researcher and the research assistants with a time lapse of two weeks, although the period was extended as appropriate where necessary to enhance the

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response rate. This method was appropriate in light of the large sample size, its huge geographical dispersion and given the questionnaire’s large size.

3.7.1 Pilot Study

Prior to real collection of data, questionnaire piloting was carried out with use of various official from the county who were not included in the final study. As per Mugenda and Mugenda (2009), 5-10% sample is term sufficient for carrying out piloting of a questionnaire. Therefore, distributing questionnaires to 20 county officials – representing 6% of the study sample, tested the questionnaire suitability for this research.

They were requested to examine the questions for relevance, understanding, denotation as well as clarity. Pre-testing allowed establishment of the instrument’s validity and reliability by validating the question’s coherence, understanding and denotation.

3.7.2 Validity and Reliability of the Instruments

As per Saunders et al., (2003), expert judgment establishes the validity. Besides, the university supervisors as well as other experts were closely consulted during the research tool’s development. The research instrument validity was then tested, by use of Cronbach’s Alpha with an acceptance level of 70%, for internal consistency. The refining of the questionnaire was based on the replies and the areas that needed to be revised so as to make them more relevant before the real data collection. Cronbach’s coefficient was used to measure internal consistency, which is also known as data reliability as well as average correlation (Osborn and Waters, 2012). As a thumb rule, alpha that was acceptable was supposed to be at least 0.70 or more. Conducting diagnostic tests prior to the data cleaning for analysis to check for the multi-collinearity. Findings of the validity and reliability are as presented in section 4.1.1 and 4.1.2.

3.7.3 Administration of the Instruments

The study used drop and pick later method with a time lapse of two weeks for responding. The exercise was conducted between 1 to 2pm as well as 4 to 6 pm - the day’s regular break times. The researcher expected the data collection exercise took one-month period so as to

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get the required information. The researcher also made telephone calls for follow-up to remind the respondents. The researcher and research assistants also had weekly meetings in order to assess development as well as correcting any issues raised during the exercise. The instruments were checked to ensure that the questionnaires were well filled, after the exercise, before entering data into computer for analysis.

3.8 Data Analysis Methods

Cleaning of the data was then done that involved checking of errors. To facilitate data entry, the collected questionnaires were indexed and content coded. A statistical analysis programme was used in the analysis of the data. Frequencies and descriptive statistics were done for all variables and the data obtained presented in tables and graphs in frequency form. Descriptive and inferential statistics was used. For further analysis of the data, basic features of data collected were provided. Qualitative data was arranged according to objectives of the research and the responses analyzed in themes and integrated with the findings from quantitative data in discussions.

For ensure further data analysis triangulation, various statistical methods were applied including; factor analysis as well as descriptive analysis. The descriptive statistics employment enabled for the data reduction and summary and items of variables analysis in order to offer better understanding as to the features of the sample.

The study used regression models for testing the association amongst the variables of the study. As specified below was the regression model applied for this study:

Y= β0 + β 1X1 + β2X2+β3X3+ β 4X4+ ε …...Model (i)

Y= β0 + β 1X1M+β2X2M + β3X3M + β 4X4M+ ε …...Model (ii)

Explained as;

Y = Dependent variable (Performance of county governments) X = Independent variables (Effective corporate governance)

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β0 = Constant term

X1= Inclusiveness of employees

X2 = Regulatory bodies functions

X3 = Consensus orientation practices

X4 = Stakeholder’s participation M = Moderator (Political environment) e = Error term (standard error)

The study used the moderated multiple regression (MMR) for testing the political environment moderating influence. To compare the political environment moderating effect, MMR analysis was used where analysis and interpretation of the models R-squared change was obtained from the model summaries with a focus of testing the hypothesis that the association between corporate governance and performance of county governments was moderated by the government policies. Testing for normality for all the variables being investigated was conducted by use of Q-Q plots. Tables, pie charts and graphs were used for data presentation. Analysis of qualitative data was done using content analysis.

Structural equation modeling (SEM) involves generation of path analysis and diagrams that show interrelationships among the study variables. This study used absolute fit indices and incremental fit indices since they are the most commonly used in SEM (Hair et al, 2010). Incremental fit indices measure the extent to which the estimated model fit to a baseline model assuming that all the observed variables are uncorrelated (Ping, 2004) while the absolute fit indices measure how well the researcher’s theory is represented by the observed values of the sample data (Hair et al, 2010)

Earlier studies have employed AMOS for SEM and proven that SEM is appropriate in cross section research (Mohdsuki, 2011; Mohdsuki & Ramayah, 2010). Model analysis was done using the Structural equation-modeling (SEM) model (Schumacker & Lomax, 1996), which was also used in this study’s testing for hypothesis relationship. These were the null hypotheses that inclusiveness of employees, functions of regulatory bodies, consensus orientation practices and stakeholders’ participation where Kenyan county governments performance was found not to relate and the also Kenyan county governments’ corporate

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governance and performance were found to have a null hypothesis on its political environment. The problems of estimation and hypothesis are tested through SEM, which is an easier method to find out the extent, at which they lie, problems that were initially thought to only be solved by statisticians (Bhattacharyya, 2011).

The regression, factor analysis, simultaneous equations, and analysis of variance are subsumed by SEM, which is a multivariate analysis technique as standard methods. Measurement errors are corrected through SEM which has the most powerful ability of computation errors correction. Flexibility is also another factor that drives SEM. SEM is made easy by the software of Analysis of Moment Structures (AMOS). The variables were linked through AMOS which constructed conceptual model in the study.

3.9 Ethical Considerations

Protocols, contracts’ nature, privacy of the participants, anonymity, access, consent of information, principle of not doing any harm and confidentiality the ethics adopted are the major codes of research. It is of importance if the researcher ensures that the respondents’ rights to privacy and safety are observed. Data collection and main research was done ensuring several factors are observed. The researcher, including the code of research ethics stipulated by United States International University – Africa, familiarized various ethical standards. The supervisor helped in research tools development as well as their identification prior to the fieldwork.

Kenya being currently scrutinized with bribery among its counties was another consideration. These could result to respondents’ fear of giving replies with a thought that they are being implicated in their jobs. It was accordingly important that the researcher inform the respondents the importance of the study and clearly inform them that the study is for academic purpose only not to be confused by other studies that may be ongoing and hinder them from participating. Participants chosen for the research were consulted before the data collection so as to inform them and prepare them before the process. Therefore, respondents were allowed to participate out of their own will. Respondents were also directed through the giving consent process. Those who participated in the study were recapped that their

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contribution was out of their own will and they could not in any way be persecuted. Permit from NACOSTI was applied by the researcher to undertake the study, with approval letters sought prior to the administration of the research tools.

3.10 Chapter Summary

Chapter three explains methods used in the study, population, size of the sample and how it was arrived at. Data collection methods and tools are also explained in this chapter as well as how the data collected was analyzed. The development of the data research tool (questionnaire) as well as the method of administration to the sample was explained in this chapter.

This chapter acts as a chapter four stepping stone since it clearly outlines findings and study analysis followed by chapter five with the researcher’s findings discussion, conclusions as well as the recommendations.

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CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

Chapter four covers the study results attained from collected information using questionnaires. It presents the findings on the demographic information of the respondents and their views on how corporate governance affects county governments’ performance in Kenya. In this chapter, the tables as well as figures are provided by the researcher with summarized joint opinions of the respondents to simplify the presentation of the findings.

The researcher administered questionnaires to the sample target population of 354 respondents. Out of the administered questionnaires, 278 were completely filled out. This gave a return rate of 78.5%. Therefore, this return rate was significant as per Ndegwa (2016) suggestions that for collected data to be analyzed, the return rate should be 50% or more.

Table 4. 1: Response Rate Group Sample Response Response Rate (%) Governors 5 3 60.0 Deputy Governors 5 2 40.0 County ministers 75 62 82.7 County secretaries 5 3 60.0 Deputy County secretaries 5 2 40.0 MCAs 257 206 80.2 Total 354 278 78.5

4.1.1 Validity Analysis

The questionnaire’s construct validity can be tested using factor analysis (Kibua & Mwabu, 2016). To see whether the scale is one-dimensional, it is usually important to carry out factor analysis on the scale data. In such a factor analysis, the variables are the responses to the individual scale items and are usually well related to each other. The key objective in this case being to generate few factors capturing most of the variance in the observed variables. If variables are highly correlated (r >0.8 or r <-.8), it becomes difficult to establish unique contribution to a factor whereas if a variable are lowly correlated (-0.3 < r < 0.3), the variable probably doesn’t measure the same underlying construct as the other variables. When all

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items together represent the underlying construct well, then the questionnaire is said to be construct valid. Exploratory factor analysis detects the constructs/factors that underlie a dataset based on the correlations between variables (in this case, questionnaire items) (Kaplan & Norton, 2011). The factors, which describe the highest proportion of variables, share variance are expected to represent the underlying constructs.

Table 4. 2: Communalities Initial Extraction Our employees are able to address customer needs and complaints 1.000 .941 quickly and equally to all residents Employees are provided with the best place to work 1.000 .970 County staff have developed skills that make performance of their 1.000 .956 work easy The county ensures fair recruitment procedures 1.000 .983 Our training structure is enhanced to ensure participation of all 1.000 .935 stakeholders We have adopted capacity building programs directed at ensuring 1.000 .922 employees have the same goals We train our employees on technical and self-improvement so as to 1.000 .909 enhance productivity We regularly review our employee welfare to incorporate cultural 1.000 .942 diversity We ensure gender balance to promote equality 1.000 .928 The county has performed well in fund management compared to 1.000 .919 other counties We have checks and balances at all stages of public funds utilization 1.000 .951 We have created effective communication procedures from the 1.000 .928 managing team to the members of the public We have created fair working conditions that favor investment and 1.000 .951 trade Regulations set by the Public Procurement Regulatory Authority 1.000 .866 regulate and shape the county’s procurement procedures Regulatory conditions are set to motivate co-ordination with other 1.000 .844 counties The initial communalities are variance estimates for each variable that the components account for in general. The factor solution account for all the factors that are found in each variable estimated from extraction communalities. Small values (in extraction column) represent variables not fitting well in the factor solution (Osborn and Waters, 2002) (See Appendix XI, Table 1).

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Table 4. 3: Total Variance Explained Component Initial Eigenvalues Extraction Sums of Squared Loadings Total % of Cumulative Total % of Variance Cumula Variance % tive % 1 25.547 54.355 54.355 25.547 54.355 54.355 2 6.829 14.531 68.886 6.829 14.531 68.886 3 4.126 8.779 77.665 4.126 8.779 77.665 4 2.219 4.721 82.386 2.219 4.721 82.386 5 1.842 3.919 86.304 1.842 3.919 86.304 6 1.490 3.170 89.474 1.490 3.170 89.474 7 1.202 2.558 92.032 1.202 2.558 92.032 8 .877 1.867 93.899 9 .718 1.528 95.427 10 .524 1.115 96.542 Extraction Method: Principal Component Analysis.

The Kaiser Normalization Criterion was used in Table 4.3, allowing extraction of components with an Eigen value > 1. The extraction method used was the principal component analysis. 7 major factors, accounting for 92.032% of the total variation, were extracted.

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Figure 4. 1: Scree Plot

The identification of the variables falling under each of the 7 major extracted factors is illustrated in Table 4.4 (Component matrix Table) as allowed for. All the 47 parameters were looked and placed under any of the 7 factors in respect to the variability percentage explaining the total variability for each factor. All the indicators of the variables had their total variability above 0.4 and hence they were of high construct validity (Schindler, 2010). (See Appendix XI, Table 2).

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Table 4. 4: Component Matrixa Component 1 2 3 4 5 6 7 Our employees are able to address customer needs and complaints quickly and .182 .604 .075 .685 .257 .005 .048 equally to all residents Employees are provided with the best place .954 .126 .100 .031 .142 .101 .048 to work County staff have developed skills that .959 .123 .031 .059 .045 .028 .122 make performance of their work easy The county ensures fair recruitment .001 .699 .602 .315 .099 .152 .022 procedures Our training structure is enhanced to .830 .289 .187 .119 .017 .225 .250 ensure participation of all stakeholders We have adopted capacity building programs directed at ensuring employees .714 .156 .470 .014 .235 .308 .128 have the same goals We train our employees on technical and self-improvement so as to enhance .932 .064 .158 .089 .051 .019 .010 productivity We regularly review our employee welfare .947 .026 .108 .022 .175 .018 .031 to incorporate cultural diversity We ensure gender balance to promote .901 .266 .172 .094 .066 .016 .043 equality The county has performed well in fund .193 .105 .672 .267 .333 .260 .411 management compared to other counties We have checks and balances at all stages .930 .109 .005 .016 .194 .185 .053 of public funds utilization We have created effective communication procedures from the managing team to the .149 .525 .400 .181 .042 .028 .689 members of the public We have created fair working conditions .088 .620 .665 .310 .017 .113 .085 that favor investment and trade Regulations set by the Public Procurement Regulatory Authority regulate and shape .838 .118 .010 .016 .291 .243 .071 the county’s procurement procedures Regulatory conditions are set to motivate .252 .062 .126 .270 .033 .782 .134 coordination with other counties The set regulations enhance networking with other likeminded counties so as to .309 .535 .218 .097 .237 .529 .311 satisfy the public needs of our county Market openness is enhanced by our .805 .289 .032 .187 .332 .045 .080 regulatory bodies

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4.1.2 Reliability Analysis

The Cronbach’s Alpha (α), an internal consistency measure, was used for reliability analysis. As per Cooper and Schindler (2013), minimum Alpha value of 0.7 is used as a benchmark for establishing the reliability of the variables. The study results indicated that Inclusiveness (α = 0.900), Regulatory bodies (α = 0.863), Consensus orientation (α = 0.912), Stakeholders Participation (α = 0.710), Political Environment (α = 0.703) and Performance (α = 0.733) were all reliable since their Cronbach's Alpha values exceeded 0.7.

Table 4. 5: Reliability Analysis Cronbach's Alpha (α) N of Items Inclusiveness .900 9 Regulatory bodies .863 9 Consensus orientation .912 10 Stakeholders Participation .710 10 Political Environment .703 9 Performance .733 38

4.2 Demography Data The study sought to enquire about the respondents’ general information including gender, County, position in the county, age, level of education, duration worked with county, number of tribes in the county and party affiliation of the county. This was to ascertain their suitability as well as the eligibility to participate in the study.

4.2.1 Respondents’ Gender According to the findings, male respondents were the majority at 71.6%, the rest being female at 28.4%. This shows that the study considered both male and female respondents to obtain reliable information on the subject under study.

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Figure 4. 2: Age of the respondent

4.2.2 Respondents County

Most of the respondents were from Meru (7.2%) followed by Machakos (6.5%) then Nairobi (4.7%), then Uasin Gishu (4.3%) then Kiambu and Narok at 3.6% while respondents from Murang’a and West Pokot counties were only 3.2% each. Further each of Samburu, Nakuru and Bungoma had 2.5% with Baringo, Elgeyo Marakwet, Nyeri, Embu and Tharaka Nithi having 3.2% respondents. From Kajiado, Nandi, Trans Nzoia, Garissa, Tana River, Kwale, Kilifi, Bomet, Vihiga, Isiolo, Mombasa, Busia, Migori, Nyamira and Kisii each had 1.8% of the respondents. Makueni, Nyandarua, Kirinyaga, Turkana, Taita Taveta, Marsabit, Kitui and Kakamega produced only 1.4% respondents each with Mandera and Kakamega having only 0.7% and 0.4 respectively. This implies that the respondents came from across all the counties hence it was possible to generalize results.

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Table 4. 6: Respondents County Frequency Percent Nairobi 13 4.7 Murang’a 9 3.2 Kiambu 10 3.6 Machakos 18 6.5 Kajiado 5 1.8 Samburu 7 2.5 Nandi 5 1.8 Baringo 6 2.2 West Pokot 9 3.2 Narok 10 3.6 Nakuru 7 2.5 Trans Nzoia 5 1.8 Kericho 8 2.9 Elgeyo Marakwet 6 2.2 Laikipia 8 2.9 Bungoma 7 2.5 Nyeri 6 2.2 Uasin Gishu 12 4.3 Embu 6 2.2 Tharaka Nithi 6 2.2 Kitui & Makueni 8 2.8 Nyandarua 4 1.4 Kirinyaga 4 1.4 Turkana 4 1.4 Meru 20 7.2 Garissa 5 1.8 Taita Taveta& Tana River 9 4.2 Marsabit 4 1.4 Kwale 5 1.8 Kilifi 5 1.8 Kakamega & Mandera 3 1.1 Bomet 5 1.8 Vihiga 5 1.8 Isiolo 5 1.8 Mombasa 5 1.8 Busia 5 1.8 Migori 5 1.8 Kisii 5 1.8 Nyamira 5 1.8 Kakamega 4 1.4 Total 278 100.0

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4.2.3 Respondents Position

Majority of the respondents were MCAs as shown by 74.1%, followed by County ministers at 22.3% then governors and county secretaries at 1.1% while deputy governors and deputy county secretaries were the least at 0.7%. This shows that the researcher obtained information from all the targeted respondents. This implies that the researcher obtained reliable information concerning the subject under study. Table 4. 7: Respondents Position Response Response Rate (%) Governors 3 1.1 Deputy Governors 2 0.7 County ministers 62 22.3 County secretaries 3 1.1 Deputy County secretaries 2 0.7 MCAs 206 74.1 Total 278 100.0

4.2.4 Age of the Respondent As per the study results on analysis of respondents age, 36.3% of them were aged 40- 50 years as shown by, 36- 40 years as expressed by 29.5%, 30-35 years as illustrated by 13.7% and above 50 years as shown by 9.4%. Other respondents indicated that they were aged 26- 30 years as shown by 9.0%, below 20 years as shown by 1.1% and 21-25 years as shown by 1.1%. This is an indication that respondents who participated in the study were mature enough to cooperate in giving information on the subject under study. This means that the researcher obtained reliable information.

Table 4. 8: Age of the Respondent Frequency Percent Below 20 years 3 1.1 21-25 years 3 1.1 26- 30 years 25 9.0 30-35 years 38 13.7 36- 40 years 82 29.5 40- 50 years 101 36.3 Above 50 years 26 9.4 Total 278 100.0

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4.2.5 Level of Education The findings show that 58.3% of the respondents indicated that their level of education was university, 31.7% indicated college and secondary as their level of education while 2.2% indicated primary. This is an indication that the study presents mature participants with an ability to understand the subject being studied and hence they were able to give reliable and relevant data.

Figure 4. 3: Level of Education

4.2.6 Number of years Worked with the County The results reveal that majority of the participants showed that they had been working for county for a period of 1 to 5 years as shown by 44.6%. Others indicated that they had worked for county for below 1 year as expressed by 36.3%, above 15 years as shown by 8.3% and between 6 and 10 years as shown by 7.2% while those who indicated 10 to 15 years were only 3.6%. Therefore, majority of the respondents had worked in the county for long enough to understand and volunteer relevant and reliable information related to the subject matter under study.

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Table 4. 9: Number of years Worked with the County

Frequency Percent Below 12 months 101 36.3 1-5 years 124 44.6 6-10 years 20 7.2 10-15 years 10 3.6 above 15 years 23 8.3 Total 278 100.0

4.2.7 Number of Tribes in the County Most of the counties had one ethic group dominating over 80% as shown by 65.1% with other counties being cosmopolitan expressed by 18.7% and comprising of 50% from one ethnic group and the rest is a combination of others as illustrated by 16.2%. This shows that the researcher obtained information across all the tribes in Kenya making information obtained more reliable.

Table 4. 10: Number of Tribes in the County Frequency Percent One ethic group dominates over 80% 181 65.1 The county is cosmopolitan 52 18.7 The county comprises of 50% from one ethnic group and 45 16.2 the rest is a combination of others Total 278 100.0

4.2.8 Party Affiliation of the County Most of the respondents indicated that their country party affiliation of the county was ruling party as shown by 61.9%, opposition party as illustrated by 33.5% and other parties as shown by 4.7%. This implies that the information was obtained from both opposition and ruling party strongholds meaning that it could be relied upon.

Table 4. 11: Party Affiliation of the County Frequency Percent Ruling party 172 61.9 Opposition party 93 33.5 Others 13 4.7 Total 278 100.0

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4.3 Inclusiveness

From the findings, the respondents agreed that they have adopted capacity building programs directed at ensuring employees have the same goals as expressed by a mean of 4.396; that the county ensures fair recruitment procedures as expressed by a mean of 4.385; that county staff have developed skills that make performance of their work easy as illustrated by a mean of 4.381 and that their training structure is enhanced to ensure participation of all stakeholders as indicated by a mean score of 4.363.

Participants also agreed that employees are provided with the best place to work as expressed by a mean of 4.356; that they train employees on technical skills and self-improvement so as to enhance productivity as indicated by a mean of 4.299; that they regularly review employee welfare to incorporate cultural diversity as illustrated by a mean of 4.083 and that they ensure gender balance to promote equality as shown by an average of 3.968. They also disagreed on the fact that their employees are able to address customer needs and complaints quickly and equally to all residents as expressed by a mean of 1.558. Further as shown by a coefficient of variation there was a consensus that employees are provided with the best place to work.

Table 4. 12: Statements on Inclusiveness Mean Std. Dev. COV Rank of COV Our employees are able to address customer needs and 1.558 0.572 0.367 9 complaints quickly and equally to all residents Employees are provided with the best place to work 4.356 0.556 0.128 1 County staff have developed skills that make 4.381 0.652 0.149 3 performance of their work easy The county ensures fair recruitment procedures 4.385 0.641 0.146 2 Our training structure is enhanced to ensure 4.363 0.742 0.170 5 participation of all stakeholders We have adopted capacity building programs directed 4.396 0.712 0.162 4 at ensuring employees have the same goals We train our employees on technical skills and self- 4.299 0.811 0.189 7 improvement so as to enhance productivity We regularly review our employee welfare to 4.083 0.724 0.177 6 incorporate cultural diversity We ensure gender balance to promote equality 3.968 0.771 0.194 8

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4.3.1 Correlation Analysis The findings show a correlation between inclusiveness and performance was shown by 0.497 correlation factor. The p=0.00 which is less than 0.05 imply a statistically significant relationship. Hence any positive change in inclusiveness would increase the performance of county governments in Kenya.

Table 4. 13: Correlation Analysis Performance Inclusiveness r 1 Performance Sig. (2-tailed) - r .497** 1 Inclusiveness Sig. (2-tailed) .000 - **. Correlation is significant at the 0.01 level (2-tailed).

4.3.2 Test of Hypothesis One The study sought to test first hypothesis which is “Inclusiveness of employees have no significant influence on performance of county governments in Kenya”. From the findings, the adjusted R square was 0.245 meaning 24.5% of the variation in performance of county governments in Kenya is explained by inclusiveness.

Table 4. 14: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .497a .247 .245 6.57304 a. Predictors: (Constant), Inclusiveness

The ANOVA results shows that relationship between the performance of county governments in Kenya and inclusiveness was significant since the F-calculated=90.765 was > F-critical= 3.89 and the p value =0.00 was < 0.05.

Table 4. 15: ANOVA Model Sum of Squares df Mean Square F Sig. Regression 3921.503 1 3921.503 90.765 .000b 1 Residual 11924.540 276 43.205 Total 15846.043 277

The regression equation obtained from the outcome was: - Performance =92.024 + 1.581 Inclusiveness+ e…….……………equation (1)

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From the findings, the study found that if inclusiveness was held constant, then the county governments performance in Kenya will be 92.024 which is significant since p=0.000 is less than 0.05. The study further found that a unit change in inclusiveness changes would lead to 1.581 units change in performance of county governments in Kenya. This shows that the null hypothesis one was not accepted meaning that inclusiveness had significantly influenced county governments’ performance in Kenya.

Table 4. 16: Coefficients Model Unstandardized Standardized t Sig. Coefficients Coefficients B Std. Error Beta (Constant) 92.024 5.953 15.459 .000 1 Inclusiveness 1.581 .166 .497 9.527 .000 a. Dependent Variable: Performance

4.4 Regulatory Bodies As per the findings, the respondents agreed on the facts that regulations set by the Public Procurement Regulatory Authority regulate and shape the county’s procurement procedures as shown by an average of 4.471; that they have checks and balances at all stages of public funds utilization as shown by a mean score of 4.450 and that they have created effective communication procedures from the managing team to the members of the public as expressed by an average of 4.446.

The respondents also agreed that they have created fair working conditions that favor investment and trade as indicated by an average of 4.378; that the county has performed well in fund management compared to other counties as expressed by an average of 4.345 and that market openness is enhanced by regulatory bodies with an average of 4.309.

Further there was an agreement among the respondents that the set regulations enhance networking with other like-minded counties so as to satisfy the public needs of the county as expressed by an average of 4.234 but disagreed on the facts that regulatory conditions are set to motivate co-ordination with other counties as shown by an average of 2.450 and that regulatory bodies create a risk in managing the county as expressed by an average of 2.284.

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Also, there was a consensus that counties have created effective communication procedures from the managing team to the members of the public as shown by a coefficient of variation.

Table 4. 17: Statements on Regulatory Bodies Mean Std. COV Rank of Dev. COV The county has performed well in fund management 4.345 0.633 0.146 3 compared to other counties We have checks and balances at all stages of public funds 4.450 0.713 0.160 5 utilization We have created effective communication procedures from 4.446 0.615 0.138 1 the managing team to the members of the public We have created fair working conditions that favor 4.378 0.773 0.176 7 investment and trade Regulations set by the Public Procurement Regulatory 4.471 0.651 0.146 2 Authority regulate and shape the county’s procurement procedures Regulatory conditions are set to motivate co-ordination 2.450 0.498 0.203 8 with other counties The set regulations enhance networking with other like- 4.234 0.735 0.174 6 minded counties so as to satisfy the public needs of our county Market openness is enhanced by our regulatory bodies 4.309 0.651 0.151 4 Regulatory bodies create a risk in managing the county 2.284 1.779 0.779 9

4.4.1 Correlation Analysis From the study results, the relationship between the regulatory bodies and performance of county governments in Kenya was positive and significant as shown by a coefficient of 0.691 and the p=0.00 which is less than 0.05. Table 4. 18: Correlation Analysis Performance Regulatory Bodies r 1 Performance Sig. (2-tailed) - r .691** 1 Regulatory Bodies Sig. (2-tailed) .000 - **. Correlation is significant at the 0.01 level (2-tailed).

4.4.2 Test of Hypothesis Two Hypothesis 2, which was tested, was “The functions of regulatory bodies’ have no significant influence on performance of county governments in Kenya”. From model summary in Table

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4.19, the adjusted R2 was found to be 0.475. This is an indication that 47.5% of variations in county governments’ performance in Kenya was accounted by regulatory bodies.

Table 4. 19: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .691a .477 .475 5.48074 a. Predictors: (Constant), Regulatory Bodies

The probability value of 0.00 implies the model was highly significant in predicting how regulatory bodies influenced county governments’ performance in Kenya. The F-calculated was 251.524 and was found to be more than the F-critical (3.89), at 5 per cent significance level, and therefore, the overall regression model was significant.

Table 4. 20: ANOVA Model Sum of Squares df Mean Square F Sig. Regression 7555.417 1 7555.417 251.524 .000b 1 Residual 8290.626 276 30.038 Total 15846.043 277 a. Dependent Variable: Performance b. Predictors: (Constant), Regulatory Bodies

The regression equation obtained from this outcome was: - Performance =69.146+ 2.247 Regulatory Bodies + e………………equation (2)

From the findings, the study found that holding regulatory bodies were constant, the county governments performance in Kenya will be 69.146 which is significant since p=0.000<0.05. A unit change in regulatory bodies’ changes would lead to 2.247 units change in performance of county governments in Kenya. This shows that the null hypothesis two was not accepted meaning that regulatory bodies significantly influenced performance of county governments in Kenya in Kenya.

Table 4. 21: Coefficients Model Unstandardized Standardized t Sig. Coefficients Coefficients B Std. Error Beta (Constant) 69.146 5.021 13.770 .000 1 Regulatory Bodies 2.247 .142 .691 15.860 .000 128

a. Dependent Variable: Performance

4.5 Consensus Orientation As per the study results, there was a strong agreement among the participants with the fact that their input played an important part in the implementation of the county’s strategic plan as indicated by a mean of 4.701 and that their governor communicates what he/she feels should be prioritized to his/her subordinates as represented by an average of 4.630. They were also in agreement that they ensure that the public understands the county’s priorities as shown by a mean of 4.439; that the county appreciates and guards the rights of all residents and stakeholders as expressed by a mean of 4.414; that county workforce works together to promote increased commitment from all stakeholders as illustrated by a mean of 4.396; that as a county, they have realized that high involvement at all work levels lead to greater individual efficiency thus, greater overall performance as indicated by an average of 4.371.

The respondents also agreed that county directors work in consultation with other stakeholders as shown by a mean of 4.327; that funds use information is displayed publicly for all to access as indicated by a mean of 4.065 and that managers, through practices that offer a better understanding of the county performance mission, involved non-supervisory level employees as illustrated by an average of 3.763. They also disagreed that the county government management through the County Executive Committee (CEC) has resulted in fair and equitable funds-use resulting to a decrease in the risk of fraudulent exercises as shown by 2.403. Nevertheless, there was a growing consensus that the respondents’ input plays an important part as the county implemented its strategic plan.

Table 4. 22: Statements on Consensus Orientation Mean Std. COV Rank of Dev. COV The county appreciates and guards the rights of all 4.414 1.001 0.227 9 residents and stakeholders Funds use information is displayed publicly for all to access 4.065 0.713 0.175 8 The county government management through the County 2.403 0.554 0.230 10 Executive Committee (CEC) has resulted in fair and equitable funds-use resulting to a decrease in the risk of fraudulent exercises County directors work in consultation with other 4.327 0.628 0.145 5 stakeholders 129

County workforce work together to promote increased 4.396 0.590 0.134 3 commitment from all stakeholders Our governor communicates what he feels should be 4.630 0.703 0.152 6 prioritized to his/her subordinates My input plays a valuable role the implementation of the 4.701 0.564 0.120 1 county strategic plan As a county, we have realized that high involvement at all 4.371 0.621 0.142 4 work levels lead to greater individual efficiency thus, greater overall performance Managers involve non-supervisory level employees through 3.763 0.648 0.172 7 practices that offer a better understanding of the county performance mission We ensure that the public understand the county’s priorities 4.439 0.539 0.121 2

4.5.1 Correlation Analysis

As per the findings, the study shows that performance of county governments in Kenya and the consensus orientation have a strong, positive and significant correlation amongst themselves as shown by a coefficient of 0.654, p=0.00.

Table 4. 23: Correlation Matrix Performance Consensus Orientation r 1 Performance Sig. (2-tailed) - r .654** 1 Consensus Orientation Sig. (2-tailed) .000 - **. Correlation is significant at the 0.01 level (2-tailed).

4.5.2 Test of Hypothesis Three

The third hypothesis that the researcher tested was “Consensus orientation practices have no significant influence on performance of county governments in Kenya”. From Table 4.24, adjusted R square was 0.425 meaning 42.5% of Kenya’s county governments’ performance variation is explained by consensus orientation.

Table 4. 24: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .654a .427 .425 5.73432 a. Predictors: (Constant), Consensus orientation The probability value of 0.000 (<0.05) showed that the model was highly significant in explaining how consensus orientation influenced the performance of Kenya’s county

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governments. Given that The F calculated = 205.899 was > F-critical (3.89), this was further evidence of the significance of the overall model.

Table 4. 25: ANOVA Model Sum of Squares df Mean Square F Sig. Regression 6770.480 1 6770.480 205.899 .000b 1 Residual 9075.563 276 32.882 Total 15846.043 277 a. Dependent Variable: Performance b. Predictors: (Constant), Consensus orientation

The regression equation obtained from this outcome was: - Performance = 59.335 + 2.151Consensus Orientation+ e………………equation (3)

The findings revealed that if consensus orientation was held constant at zero, then the performance of county governments in Kenya will be 59.335 which is significant since p=0.000 is less than 0.05. The study further showed that a unit change in consensus orientation leads to 2.151 units change in performance of county governments in Kenya. As such, the null hypothesis three was rejected. The study concludes consensus orientation significantly influences county governments’ performance in Kenya.

Table 4. 26: Coefficients Model Unstandardized Standardized t Sig. Coefficients Coefficients B Std. Error Beta (Constant) 59.335 6.231 9.522 .000 1 Consensus orientation 2.151 .150 .654 14.349 .000 a. Dependent Variable: Performance

4.6 Stakeholder’s Participation The study results shows that the respondents were in agreement on the facts that there are consultations on issues affecting project performance in the county as indicated by a mean of 4.407, members of the public are provided with a platform to exercise their oversight functions as shown by a mean of 4.371, the county encourages investors participation in county development plans as illustrated by an average of 4.360 and the County Government

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ensures effective communication to ensure the public understands the counties’ next point of action as expressed by an average of 4.320.

The respondents also agreed that new projects implementation is a shared accountability that includes all shareholders as shown by a mean of 4.266; that innovative solutions are as a result of stakeholder involvement to share in solving development challenges facing the county as shown by a mean of 4.187; that civic education units have been established for educating citizens on their rights in county development as expressed a mean of 4.079 and that monitoring of county operations involves all stakeholders as is a collective responsibility that as depicted by a mean of 4.054.

The respondents were in concurrence that the county government makes sure that both individuals and groups of people are given responsibilities to ensure the success of identified projects within the county as expressed a mean of 3.978 but disagreed on the fact that members of the public take part in budgeting as indicated by a mean of 2.371. As shown by a coefficient of variation there was a consensus that the county encourages investor’s participation in county development plans.

Table 4. 27: Statements on Stakeholder’s Participation Mean Std. COV Rank of Dev. COV Members of the public are provided with a platform to 4.371 0.790 0.181 9 exercise their oversight functions Innovative solutions are as a result of stakeholder 4.187 0.637 0.152 3 involvement to share in solving development challenges facing the county Members of the public take part in budgeting 2.371 0.527 0.222 10 Civic education units have been established for educating 4.079 0.670 0.164 5 citizens on their rights in county development The county encourages investors participation in county 4.360 0.544 0.125 1 development plans The County Government ensures effective communication 4.320 0.722 0.167 7 to ensure the public understands the counties’ next point of action There are consultations on issues affecting project 4.407 0.645 0.146 2 performance in the county New projects implementation is a shared 4.266 0.675 0.158 4 accountability that includes all shareholders The county government ensures that both individuals and 3.978 0.663 0.167 6 groups of people are given responsibilities to ensure the

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success of identified projects within the county Monitoring of county operations is a collective 4.054 0.701 0.173 8 responsibility that involves all stakeholders

4.6.1 Correlation Analysis

The study results on correlation analysis indicated a strong, positive and significant correlation between performance of county governments in Kenya and stakeholder participation as shown by a coefficient of 0.866, p=0.00.

Table 4. 28: Correlation Matrix Performance Stakeholders Participation r 1 Performance Sig. (2-tailed) - r .866** 1 Stakeholders Participation Sig. (2-tailed) .000 - **. Correlation is significant at the 0.01 level (2-tailed).

4.6.2 Test of Hypothesis Four

Hypothesis 4 tested by researcher was “Stakeholders’ participation has no significance influence on county governments’ performance in Kenya”. As per Table 4.29, the adjusted R square was 0.749. This meant that 74.9% of the county governments’ performance variation is explained by stakeholder participation.

Table 4. 29: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .866a .750 .749 3.78782 a. Predictors: (Constant), Stakeholders participation b. The probability value of 0.000 being < 0.05 revealed that the regression relationship was highly significant in expounding how stakeholder participation influenced performance among Kenya’s county governments. The overall model was significant since at 5% significance level, F calculated=828.443 was > F-critical=3.89.

Table 4. 30: ANOVA Model Sum of Squares df Mean Square F Sig.

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Regression 11886.120 1 11886.120 828.443 .000b 1 Residual 3959.923 276 14.348 Total 15846.043 277 a. Dependent Variable: Performance b. Predictors: (Constant), Stakeholders participation

The regression equation obtained from the outcome was: - Performance = 28.144 + 2.982 Stakeholders participation + e…………………equation (4)

From the study results it was revealed that if stakeholder’s participation was held constant at zero, then the performance of county governments in Kenya will be 28.144 which is significant since p=0.000 is less than 0.05. The study further found that increase in stakeholder’s participation would occasion a performance increase of 2.982 in county governments in Kenya. This shows that the null hypothesis four was not accepted meaning that stakeholders’ participation significantly influences county governments’ performance in Kenya.

Table 4. 31: Coefficients Model Unstandardized Standardized t Sig. Coefficients Coefficients B Std. Error Beta (Constant) 28.144 4.192 6.714 .000 1 Stakeholders participation 2.982 .104 .866 28.783 .000 a. Dependent Variable: Performance

4.7 Political Environment On political influence on the performance of county governments, the participants were in agreement that the governor has a good working relationship with the county assemblies as shown by a mean of 4.734; that their county’s legislative bodies are neutral and ensure awareness raising is done to attract investors as expressed a mean of 4.622, and that their county executives ensure that development is distributed equally throughout the county regardless of political pressures as illustrated by an average of 4.565.

On the same, the respondents agreed that they ensure professional associations with other counties despite their political attachments as expressed a mean of 4.050 and that the county prioritizes developments based on public interest rather than political pressures as expressed

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by a mean of 3.885. They were, however, neutral that trade associations are increased as a result of the county’s political activities as shown by an average of 2.504 and that the county’s political affiliation with the National government influences budget authorization as illustrated by an average of 2.468.

Further as per the findings, the participants were in disagreement that the political setting influences control of revenue to their preferred areas as shown by an average of 2.241 and that the political setting influences planning and development in the county as expressed a mean of 1.885 while strongly disagreeing that the political setting leads to a mismanagement of finances in the county leading to a decrease in investors and investment as represented by an average of 1.270. Nevertheless, the respondents were in consensus that their county’s legislative bodies are neutral and ensure awareness building is done to attract investors.

Table 4. 32: Statements on Political Environment Mean Std. COV Rank of Dev. COV The political setting influences control of revenue to their 2.241 1.371 0.612 10 preferred areas The political setting influences planning and development 1.885 1.020 0.541 8 in the county The political setting leads to a mismanagement of finances 1.270 0.676 0.533 7 in the county leading to a decrease in investors and investment Trade associations are increased as a result of the county’s 2.504 1.167 0.466 6 political activities We ensure professional associations with other counties 4.050 0.886 0.219 4 despite our political attachment Our county’s legislative bodies are neutral and ensure 4.622 0.528 0.114 1 awareness raising is done to attract investors Our county executives ensure that development is 4.565 0.614 0.134 2 distributed equally throughout the county regardless of political pressures The county’s political affiliation with the National 2.468 1.463 0.593 9 government influences budget authorization The county prioritizes developments based on public 3.885 1.457 0.375 5 interest rather than political pressures The governor has a good working relationship with the 4.734 0.707 0.149 3 county assembly

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4.7.1 Correlation Analysis

The findings show existence of a positive and significant association between county performance and political environment (r=0.214, p=0.00 < 0.05). Hence any positive change in political environment would increase the performance of county governments in Kenya.Table 4.33: Correlation Analysis Performance Political Environment r 1 Performance Sig. (2-tailed) - r .214** 1 Political Environment Sig. (2-tailed) .000 - **. Correlation is significant at the 0.01 level (2-tailed).

4.7.2 Test of Hypothesis Five

The researcher tested the fifth hypothesis which was “Political environment has no moderating effect on corporate governance and performance of county governments in Kenya”. The hypothesis sought to establish the moderating effect of political environment on corporate governance and performance of county governments in Kenya. Moderating effect in a regression model shows the influence of an independent variable on the dependent variable as a function of the third variable. The aim is to examine how the independent variables vary when an intervening variable is introduced in the model. The model was expressed as:

Y = β0+ β1X1 * X4 + β2X2 * X4 + β3X3 * X4 +e where:

Y = Performance of county governments in Kenya a = Constant

β = Coefficient

X1 = Inclusiveness of employees

X2 = Functions of regulatory bodies

X3 = Consensus orientation practices

X4 = Stakeholders’ participation

X5 = Political Environment

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e = error term

Stepwise regression technique consisting of two models was used to test moderating effect of Political environment on the relationship between project management practices and performance of county governments in Kenya.

Step one: Influence of Corporate Governance on Performance of County Governments in Kenya

In the first model, corporate governance aspects influence on performance of county governments in Kenya was tested, with the equation adopted as

Y = β0+ β1X1 + β2X2 + β3X3 + β4X4 +e

Where:

Y = Performance of county governments in Kenya a = Constant

β = Coefficient

X1 = Inclusiveness of employees

X2 = Functions of regulatory bodies

X3 = Consensus orientation practices

X4 = Stakeholders’ participation e = error term

Step Two: Influence of Corporate Governance and Political environment on Performance of County Governments in Kenya

In the second model, Political environment was introduced to the model with the equation adopted as

Y = β0+ β1X1 * X5 + β2X2 * X5 + β3X3 * X5 + β4X4 * X5 +e

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Where:

Y = Performance of county governments in Kenya a = Constant

β = Coefficient

X1 = Inclusiveness of employees

X2 = Functions of regulatory bodies

X3 = Consensus orientation practices

X4 = Stakeholders’ participation

X5 = Political Environment e = error term

Test Results for the Two Models

The results for the regression models were as shown in Table 4.34 and 4.35. Table 4.36 showed the model summary and change in R2.

Table 4. 34: Regression Results for Moderation

Change Statistics Model R R Adjusted Std. R F Df1 Df2 Sig. F Square R Square Error square Change change Change 1 0.817 0.668 0.663 4.339 4 273 .000 2 0.846 0.716 0.712 4.062 0.048 0.153 4 273 .011

As illustrated Table 4.40, Model 1 fits the data coefficient of determination was 0.712 with a sig F change p < 0.05 of 0.153. Based on the model, 73.3% of performance of county governments in Kenya was accounted for by corporate governance while the remaining 26.7% of performance of county governments in Kenya was attributed to other variables outside the study.

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The change statistics in the model as shown in Table 4.40 show an increase in R2 by 4.8% from 66.3% to 71.2%. The increase of 4.8% was accounted by the moderating variable introduced in the second model, which is significant since p<0.05. This implies that political environment moderates the relationship between corporate governance and performance of county governments in Kenya.

The coefficient of the moderating effect of Political environment on the relationship between project management practices and performance of county governments in Kenya was shown in Table 4.35.

Table 4. 35: Regression Coefficients to Test for Moderation Unstandardized Standardized t Sig Coefficients Coefficients B Std. Beta Error 1 (Constant) -12.791 3.655 -3.499 .001 Inclusiveness 1.217 .163 .383 7.449 .000 Regulatory Bodies 1.715 .151 .527 11.380 .000 Consensus orientation .399 .135 .121 2.959 .003 Stakeholders participation 1.006 .151 .292 6.650 .000

(Constant) 58.906 3.648 16.146 .000 Inclusiveness of employees * -.038 .007 -.675 -5.245 .000 2 Cultural practices Functions of regulatory bodies * .053 .008 .557 7.033 .000 Cultural practices Consensus orientation practices .030 .007 .505 4.577 .000 *Political environment Stakeholders participation*Political .025 .007 .369 3.395 .001 environment

The findings show that of political environment significantly moderates the relationship between corporate governance and performance of county governments in Kenya (p=0.00). Changing value of the regression coefficients after the moderating variable is introduced in the model shows this. Therefore hypothesis that political environment moderates the relationship between corporate governance and performance of county governments in Kenya was accepted and concluded that political environment moderates the relationship between project management practices and performance of county governments in Kenya.

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4.8 Performance of County Governments

The section presents findings on the aspects of performance of county governments evaluated.

4.8.1 Financial Perspective From the findings, the respondents agreed that they had a distinct increase in revenue collection that is higher than the inflation rate as indicated by a mean of 4.133 and that payments to county suppliers and contractors was done fast with few delays as indicated by a mean of 4.061 and that revenue loss loopholes had been sealed as indicated by a mean of 3.946. Similarly, they agreed that there was value for money in every project the county had undertaken as indicated by a mean of 3.755.

However, they disagreed that there have been fewer cases of fraud as indicated by a mean of 2.342 and that they had been able to prosecute more people on fraud issues as indicated by a mean of 1.655. As shown by coefficient of variation, there was a consensus that the county had a distinct increase in revenue collection that is higher than the inflation rate.

Table 4. 36: Statement on Financial Perspective Mean Std. COV Rank of Dev. COV We have had a distinct increase in revenue collection that is 4.133 0.716 0.173 1 higher than the inflation rate There have been fewer cases of fraud 2.342 1.211 0.517 5 We have been able to prosecute more people on fraud issues 1.655 1.021 0.617 6 There is value for money in every project the county has 3.755 1.413 0.376 4 undertaken. Payments to county suppliers and contractors is done fast 4.061 0.765 0.188 2 with few delays Revenue loss loopholes have been sealed 3.946 0.988 0.250 3

4.8.2 Customer Perspective

The study findings indicated respondents agreed that quality of education in their technical and vocational training institutions had improved as shown by a mean of 4.187 and that law enforcement and security was ensured by introducing community policing as a mean of 4.151

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shows. Also, they agreed they were operating well-stocked clinics and hospitals as shown by a mean of 4.101. Moreover, they agreed that access to wholesome water to residents was much better than five years ago as shown by a mean of 4.061.

Further, from the findings, they were neutral that county residents were happy with their services as shown by a mean of 3.457 and that rural roads had been upgraded (Every part of the county is accessible with good roads) as shown by a mean of 3.223 and that they had constructed more houses for residents as shown by a mean of 2.651. Nevertheless, there was a consensus that the county was operating well-stocked clinics and hospitals as shown by coefficient of variation.

Table 4. 37: Statement on Customer Perspective Mean Std. COV Rank of Dev. COV We have constructed more houses for residents 2.651 1.593 0.601 7 County residents are happy with our services 3.457 1.230 0.356 6 We are operating more well stocked clinics and hospitals 4.101 0.514 0.125 1 Law enforcement and security is ensured by introducing 4.151 0.668 0.161 4 community policing The quality of education in our technical and vocational 4.187 0.675 0.161 3 training institutions has improved Access to wholesome water to residents is much better than 5 4.061 0.537 0.132 2 years ago Rural roads have been upgraded (Every part of the county is 3.223 0.863 0.268 5 accessible with good roads)

4.8.3 Internal Process Perspective From the findings, they agreed that they were able to provide county residents with additional services as shown by a mean of 4.234 and that the county was adopting technology to ensure effective service delivery as shown by a mean of 4.227. They also agreed that county staff worked well with each other as shown by a mean of 4.104 and county residents were engaging themselves more in an informed way as shown by a mean of 3.917.

Similarly, they agreed that they had adopted performance contracting for their employees to enhance worker productivity and reduce bureaucracy as shown by a mean of 3.903 and that they had enhanced monitoring and evaluation as shown by a mean of 3.903 and that employee morale was high as shown by a mean of 3.809. Further as shown by coefficient of

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variation there was a consensus that the county was adopting technology to ensure effective service delivery.

Table 4. 38: Statements on Internal Process Perspective Mean Stdd. COV Rank of Dev. COV Employee morale is high 3.809 0.839 0.220 5 County staff work well with each other 4.104 0.601 0.146 2 We are able to provide county residents with additional 4.234 0.669 0.158 3 services The county is adopting technology to ensure effective 4.227 0.615 0.145 1 service delivery We have adopted performance contracting for our 3.903 0.829 0.212 4 employees to enhance worker productivity and reduce bureaucracy We have enhanced monitoring and evaluation 3.903 0.947 0.243 7 County residents are engaging themselves more in an 3.917 0.881 0.225 6 informed way

4.8.4 Learning and growth

The finding showed that there was an agreement that county governments serve residents using innovative ways as expressed by a mean of 4.234 and that the overall economy of the county had grown as expressed by a mean of 4.180. They also agreed that the time taken to complete projects such as roads had reduced significantly over time as expressed by a mean of 4.166 and that the county invests in new and better ways of doing things as expressed by a mean of 4.101. They also concurred that they had information on what other county governments were doing better than themselves as expressed by a mean of 3.968. As shown by coefficient of variation there was a consensus that the county invested in creative ways of doing things better.

Table 4. 39: Statements on Learning and Growth Mean Std. COV Rank of Dev. COV The county invests in creative ways of doing things better 4.101 0.598 0.146 1 We serve residents using innovative ways 4.234 0.674 0.159 3 The overall economy of the county has grown 4.180 0.733 0.175 4 The time taken to complete projects such as roads has 4.166 0.608 0.146 2 reduced significantly over time We have information on what other county governments are 3.968 0.944 0.238 5 doing better than ourselves

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4.8.5 Social From the finding they agreed that workforce diversity was encouraged as illustrated by a mean of 4.130 and that the county analyzes the internal environment before introducing any policy changes as illustrated by a mean of 4.050. They also agreed that workers with disabilities had been absorbed into the county workforce as illustrated by a mean of 3.871. As shown by coefficient of variation there was a consensus that the county analyzed the internal environment before introducing any policy changes.

Table 4. 40: Statement on Social Mean Std. COV Rank of Dev. COV Workforce diversity is encouraged 4.130 0.719 0.174 2 Workers with disabilities have been absorbed into the 3.871 0.729 0.188 3 county workforce The County analyzes the internal environment before 4.050 0.688 0.170 1 introducing any policy changes

4.8.6 Environment As shown by the findings, the respondents agreed that the county has invested in maintaining the environment as indicated by a mean of 4.263 and that they had reduced the number of complaints from stakeholders as illustrated by an average of 4.184. Moreover, they agreed that they endeavor to conserve the environment for the benefit of stakeholders as indicated by a mean of 4.176, and the County analyzed the external environment before making any decisions as indicated by a mean of 4.072. As shown by coefficient of variation there was a consensus that the county had reduced the number of complaints from stakeholders.

Table 4. 41: Statement on Environment Mean Std. COV Rank of Dev. COV The County analyzes the external environment before 4.072 0.707 0.174 4 making any decisions We endeavor to conserve our environment for the benefit 4.176 0.712 0.170 3 of stakeholders We have reduced the number of complaints from 4.184 0.600 0.143 1 stakeholders The county has invested in maintaining the environment 4.263 0.679 0.159 2

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4.8.7 Competitive Advantage From the finding, they agreed that the county staff pride themselves with an excellent culture as shown by an average of 4.345 and teamwork in the county had improved as a mean score of 4.277 indicates. Similarly, they were in agreement communication within county had enhanced as illustrated by an average of 4.259 and that productivity had increased as compared to three years ago as shown by a mean score of 4.223.

Further, the finding showed that the county had increased revenue collection as expressed by an average of 4.158 and county residents were becoming more satisfied with their services as illustrated by an average of 4.137. As shown by coefficient of variation there was a consensus that the county residents were becoming more and more satisfied with the services.

Table 4. 42: Statement on Competitive Advantage Mean Std. COV Rank of Dev. COV County staff pride themselves with a culture of 4.345 0.738 0.170 4 excellence Communication within the county has improved 4.259 0.787 0.185 6 Productivity has increased as compared to three years ago 4.223 0.770 0.182 5 Teamwork in the county has improved 4.277 0.725 0.170 3 The county has increased revenue collection 4.158 0.650 0.156 2 County residents are becoming more and more satisfied 4.137 0.560 0.135 1 with our services

4.8.8 Respondent’s Opinion on Services Provided by County Government

From the findings, the respondents indicated that services provided by county government are fully aligned as shown by 77.0 % and fairly aligned as shown by 16.2%. Other respondents indicated that services provided by county government are to some extent aligned as shown by 6.8%.

Table 4. 43: Respondent’s Opinion on services provided by County Government Frequency Percent Fully aligned 214 77.0 Fairly aligned 45 16.2 To some extent 19 6.8 Total 278 100.0

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4.8.9 County Government’s Delivered Service Quality

From the findings, the respondents indicated that the excellent delivery quality by the staff county government in terms of citizen’s needs satisfaction as illustrated by 86.3 % and good quality as illustrated by 11.5%. Moreover, the respondents indicated that the County Government’s staff delivered service quality in relation to citizen’s needs’ satisfaction were of average quality as illustrated by 2.2%. This implies that services delivery quality by the staff county government in terms of citizen’s needs satisfaction.

Table 4. 44: Quality of Services Delivered by the County Government Frequency Percent Excellent quality 240 86.3 Good quality 32 11.5 Average quality 6 2.2 Total 278 100.0

4.8.10 Process of Delivering Services to Citizens

From the findings, the respondents indicated that the delivery of services by county government was good as shown by 87.4% and that there was a slight improvement in delivery time as shown by 12.6%.

Table 4. 45: Respondent’s opinion on the Process of Delivering Services to Citizens Frequency Percent Currently, services are timely offered 243 87.4 Delivery time has slightly improved 35 12.6 Total 278 100.0 On the respondents reaction on what they believe makes their county stand out from the other 47 across the country, they indicated that they believed improved infrastructure and human settlement, reduced traffic, minimal corruption since there is transparency on public transactions, farming, fishing and mining, barter trade, transport and communication, extraction of oil and production of diesel and improved collection of taxes makes their counties stand out. They also believe that different cultures, beliefs and backgrounds, improved health facilities, having factories that process fruits and juice, creation of employment through devolution of county governments, center for education as most of the higher learning institution in the country are based in the county, and tourism promotion

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through development of tourism sites makes their counties stand out from the rest of the other counties.

Further on ways of improving corporate governance in their county that will result in improved performance of the county government, the respondents indicated having a segmented committee of corporate governance in the county to handle issues, paying taxes and improving the collection, being loyal and straight forward in performing county government activities, improving transport and communication, introducing new job opportunities and training of youths, enhancing refrigeration services for fishermen, establishing policies to enhance growth, expansion and development of business and training of farmers on modern ways of farming.

They also indicated electing appropriate leaders, acquiring technological information from developed counties, protecting public resources and ensure proper auditing of public funds, constructing more colleges and technical schools, development of wells and irrigation schemes to be used during dry season for livestock and farming activities, emphasizing integrity and ethical dealings and formation of effective executive and committee operations. Further, they suggested other ways like defining the role and responsibilities of the county officials, evaluating the performance of the county officials and making principled compensation decisions, setting goals and objectives by putting target and recommending when they are supposed to be attained and offering of low interest rates to expand businesses.

4.9 Inferential Statistics

This comprises of the correlation analysis and regression analysis. Structural equation modeling (SEM) involves generation of path analysis and diagrams that show interrelationships among the study variables. This study will use absolute fit indices and incremental fit indices since they are the most commonly used in SEM (Hair et al, 2010).

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4.9.1 Normality Test

The normality tests applied were Kolmogoroov-Smirnov and Shapiro Wilk tests. Thus, Table 4.46 depicts that both tests had p-values > 0.05, thus the study concluded that data on study variables were normally distributed.

Table 4. 46: Checking for Normality

Kolmogorov-Smirnovb Shapiro-Wilk Statistic df Sig. Statistic df Sig. Inclusiveness .492 6 .000 .496 6 .000 Regulatory Bodies .299 60 .000 .791 60 .000 Consensus orientation .391 23 .000 .625 23 .000 Stakeholder participation .240 28 .000 .868 28 .002 Political Environment .293 37 .000 .850 37 .000 Further, QQ plots were used to determine normality of the dependent variable. Figure 4.4 indicates that the dependent variable was normally distributed. Normal Q-Q plot line for performance of county governments from the findings, confirms that the data was normal.

Figure 4. 4: Normal Q-Q Plot of Performance of County Governments

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4.9.1 Overall Correlation Analysis

From the findings, the study found a positive and significant association between inclusiveness and performance of County governments (r = 0.497, p=0.000). Further, regulatory bodies were found to be positively and significantly correlated with performance of County governments (r=0.691, p=0.000). A positive and significant association was also found between performance of County governments and consensus orientation (r=0.654, p=0.000). The study found a positive and significant association between performance of County governments and stakeholders’ participation (r = 0.866, p=0.000) and that political environment positively and significantly correlated with performance of County governments (r=0.214, p=0.000).

Overall, the study revealed that stakeholder’s participation had the strongest correlation with performance of County governments followed by regulatory bodies then consensus orientation then inclusiveness while political environment had the least correlation with the performance of County governments.

Table 4. 47: Overall Correlation Analysis

Performance Inclusiveness Regulatory Bodies Consensus orientation Stakeholders participation Political Environment r 1 Performance Sig. (2-tailed)

r .497** 1 Inclusiveness Sig. (2-tailed) .000

r .691** .172** 1 Regulatory Bodies Sig. (2-tailed) .000 .004

** ** ** Consensus r .654 .787 .181 1 orientation Sig. (2-tailed) .000 .000 .002

** ** ** ** Stakeholders r .866 .375 .710 .463 1

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participation Sig. (2-tailed) .000 .000 .000 .000

** ** ** ** ** Political r .214 .773 .376 .433 .156 1 Environment Sig. (2-tailed) .000 .000 .000 .000 .009 **. Correlation is significant at the 0.01 level (2-tailed).

4.9.2 Moderated Multiple Regression

Table 4.48 shows that the R2 was 0.716. This implies that the moderating variable explained 71.6 per cent of the county governments’ performance variation in Kenya.

Table 4. 48: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .846a .716 .712 4.06183 a. Predictors: (Constant), X4M, X3M, X2M, X1M

From the findings, the p-value was found to be 0.000, which was less than 0.05. This implies that the model was appropriate in explaining the moderated independent variables influence on county governments’ performance in Kenya. F calculated = 171.864 which were significantly > the calculated F critical (2.4242) meaning the overall model was significant.

Table 4. 49: ANOVA Model Sum of Squares df Mean Square F Sig. Regression 11341.957 4 2835.489 171.864 .000b 1 Residual 4504.086 273 16.498 Total 15846.043 277 a. Dependent Variable: Performance b. Predictors: (Constant), X4M, X3M, X2M, X1M

The regression equation obtained from this outcome was: -

Y = 58.906 +0.509X1 + 0.362X2 +0.453X3 + 0.460X4 +ε

As per the findings, the study found that if all independent variables were held constant at zero, then the performance of county governments will be 58.906 which is significant since p=0.000 is less than 0.05. From the findings the coefficient for moderated inclusiveness is -

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0.038, meaning that when a unit change in inclusiveness leads to -0.038 units change in performance of county governments.

The study further found that a change of moderated regulatory bodies by one unit would result to 0.053 units change in performance of county governments. The study further found that a unit change in moderated consensus orientation would lead to 0.030 units change in performance of county governments. The study further found that a unit change in moderated stakeholder’s participation would lead to 0.025 units change in performance of county governments. Since all the variables had a p<005, then they were all significant.

Table 4. 50: Coefficients Model Unstandardized Coefficients Standardized Coefficients t p-value B Std. Error Beta (Constant) 58.906 3.648 16.146 .000 X1M -.038 .007 -.675 -5.245 .000 X2M .053 .008 .557 7.033 .000 X3M .030 .007 .505 4.577 .000 X4M .025 .007 .369 3.395 .001 a. Dependent Variable: Performance

4.9.3 Overall Regression Analysis

Table 4.51 presents the model summary that illustrates how the model fits the data being analyzed. The coefficient of determination from the findings was found to establish how a model is able to predict and was 0.885. This is an indication that 88.5 percent of the changes in county governments’ performance is accounted by stakeholders’ participation, inclusiveness, consensus orientation and regulatory bodies leaving 36.1% percent unexplained.

Table 4. 51: Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate 1 0.817 0.668 0.663 4.339 a. Predictors: (Constant), Stakeholders participation, Inclusiveness, Consensus orientation, Regulatory Bodies.

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The probability value of 0.000 in Table 4.52 depicts that the regression relationship was suitable for indicating how stakeholder’s participation, inclusiveness, consensus orientation, regulatory bodies influenced performance of county governments. The F-calculated was 132.259 at 5% significance level. Since F-calculated was more than the F-critical (2.4242), then the overall regression model is significant.

Table 4. 52: ANOVA Model Sum of Squares df Mean Square F Sig. Regression 10449.948 4 2612.487 137.259 .000b 1 Residual 5196.095 273 19.033 Total 15646.043 277 a. Dependent Variable: Performance b. Predictors: (Constant), Stakeholders participation, Inclusiveness, Consensus orientation, Regulatory Bodies

The established model for the study as depicted in table 4.49 was:

Y = -12.791+ 1.217X1 + 1.715X2 + 0.399X3 + 1.006X4

Based on the above equation, holding all predictors (stakeholder’s participation, inclusiveness, consensus orientation, regulatory bodies) constant at zero, performance of county governments was -12.791. From the regression analysis, it was clear that holding all independent variables constant the change in inclusiveness leads to a 1.217 change in the county government’s performance. The relationship was also significant with p-value 0.000<0.05.

It was revealed that if regulatory bodies increase then there would be a 1.715 increase in county government’s performance. The relationship was also significant with p-value 0.000<0.05. It was further established that an increase in the scores of consensus orientation leads to a 0.399 increase in county government’s performance. The relationship was also significant with p-value 0.003<0.05.

Further, the findings indicate that an increase in stakeholders’ participation by one unit would lead to a 1.006 increase in performance of county governments. The relationship was also

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significant with p-value 0.000<0.05. Overall, regulatory bodies had an effect classified as the largest on the performance of county governments, and then inclusiveness, stakeholders’ participation with consensus orientation having the lowest influence on performance of county governments.

Table 4. 53: Coefficients Model Unstandardized Standardized t Sig. Coefficients Coefficients B Std. Error Beta (Constant) -12.791 3.655 -3.499 .001 Inclusiveness 1.217 .163 .383 7.449 .000 Regulatory Bodies 1.715 .151 .527 11.380 .000 Consensus orientation .399 .135 .121 2.959 .003 Stakeholders participation 1.006 .151 .292 6.650 .000 a. Dependent Variable: Performance

4.10 Diagnostic Tests for Regression Assumptions Presentation of the assumptions of regression tested through diagnostic tests will be done under this section. These tests include Normality test, test for multicollinearity, homogeneity test, autocorrelation test and linearity test.

4.10.1 Test for Multicollinearity

The collinearity statistics were used in this study to check whether the independent variables were sufficiently related to shows considerable causal relationship. Based on the coefficients output, inclusiveness had a VIF value of 9.088, regulatory bodies had a VIF value of 5.400, consensus orientation had a VIF value of 4.351, sstakeholders’ participation had a VIF value of 4.717 and political environment had a VIF value of 3.289. All the VIF values were less than ten (10) implying that there were no Multicollinearity symptoms.

Table 4. 54: Collinearity Statistics Collinearity Statistics Tolerance VIF Inclusiveness .110 9.088 Regulatory Bodies .185 5.400 Consensus orientation .230 4.351 Stakeholders participation .212 4.717 Political Environment .304 3.289

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4.10.2 Homogeneity Test

This was determined using homogeneity of variances test by Levene. The test by Levene indicates existence or absence of similarity in variance between dependent and independent variables. It is therefore an evaluation of whether the spread of the scores as reflected in the variables’ variance is closely the same (Bryket al, 1988). If the Levene’s test is significant (p ≤ .05), the two variances are significantly different. For p ≥ .05, in this test, the two variances are said not to be significantly different (i.e., the variances between the data groups are similar) (Gastwirthet al., 2009). The Levene’s significances, as presented in Table 4.56, were: Inclusiveness (p = .079), Regulatory Bodies (p = .733), Consensus orientation (p = .116), Stakeholder participation (p = .194), and Political Environment (p = .063).

Table 4. 55: Levene Statistic Variables Levene Statistic df1 df2 Sig.

Inclusiveness 9.843 7 147 .079 Regulatory Bodies 4.532 7 147 .733 Consensus orientation 8.440 7 147 .116 Stakeholder participation 6.265 7 147 .194 Political Environment 7.709 7 147 .063

4.10.3 Autocorrelation Test Serial correlation is when the errors are correlated with one another. To test for this, Durbin- Watson test, which is shown in the regression output of the model, was used. As per this test expressed in Table 4.56, the value of Durbin--Watson for the model is 1.431, which is far from 2. Thus, the null hypotheses were rejected for the model so there is a problem of autocorrelation. Table 4. 56: Model Summaryb Model Durbin-Watson 1 1.431a

4.10.4 Linearity Test

This was done using the regression coefficients. The researcher rejects the null hypothesis if the p values are less than 0.005. As per the table, all the variables had beta coefficient of above 0.5. This therefore implies that all the variables exhibited linearity and that they were

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significant since their p-values were less than 0.005. Therefore, the entire null hypotheses were rejected.

Table 4. 57: Linearity Test Variable Beta coefficients P-values Inclusiveness 1.044 0.000 Regulatory Bodies 1.767 0.000 Consensus orientation .459 0.001 Stakeholders participation .976 0.000

4.11 Data Analysis and Results of the Study Variables The confirmatory measurement and the confirmatory structural models were used by the study to conduct data analysis that was done in a two-phase process. Anderson and Gerbing (1988) suggested another two-phase process which was similar to the one used in the study. Hoem Financing study done in Musharakah Mutanaqisah on Willingness to be a Partner: Amin, Rahman and Razak (2014) did an empirical investigation analysis on Malaysian Psychological Factors where a confirmatory measurement and confirmatory structural models were used which are two-phase processes. Pakistan financing of Islamic homes was investigated by Ali, Raza and Chin-Hong (2015): A Anderson and Gerbing (1988) model was used which is a SEM based approach that uses a modified TPB model of a two-phase process.

4.11.1 Conﬁrmatory Measurement Model The internal reliability, convergent, and discriminant validity measurement were evaluated as the first step using the conﬁrmatory factor analysis (CFA), which is a multiple criteria. Then the computation of factor loading matrix, communalities and principal components analysis (PCA) was done before the CFA, which used the factor analysis (EFA).

Tabachnick and Fidell (2013) opined that Exploratory Factor Analysis (EFA) is appropriate when one has no idea whether the variables they have will cluster together, and if the variables are large and one wants to describe them in terms that are simpler no a priori ideas present. It has the potential to narrow down a large sample of data into smaller one. In other words it helps the researcher in determining the belongings of the variables (Emory &

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Cooper, 1991). Ali and Chin-Hong (2015) in their study on factors affecting intention to use Islamic personal financing in Pakistan: Evidence from the modified TRA model used (EFA).

Before conducting EFA, the measuring of sampling adequacy, which is Kaiser-Meyer-Olkin (KMO) and Bartlett’s Test of Sphericity statistical tests, were done to help in assessing of structure detection data. The structure’s detection suitability tested is as shown in Tble 4.59. The factor analysis was found to be stable as 0.709 KMO value was shown which is close to 1. Structure detection’s data was found to be suitable due to the indication of Bartlett's Test of Sphericity with a p< 0.05.

For the sampling adequacy of their study on Islamic home financing in Pakistan: A SEM based approach using modified TPB model, Ali, Raza and Chin-Hong (2015) used KMO and Bartlett’s test of sphericity test values. The KMO value in their study was 0.71, which satisfied the minimum criteria suggested by Kaiser (1974). In addition, the prob. value of Bartlett’e test of spericity was 0.000 (which was less than 0.05) an indication that the correlation between the items at the 5 percent level of significance was sufficient and adequate for further analysis.

Table 4.58: Results of the Test for Suitability of Structure Detection

KMO Measure of Sampling Adequacy Bartlett's Test of Sphericity 0.709 Approx. Chi-Square 1991.050 df 277 Sig. 0.000 This study applied principal component analysis (PCA) in order to validate the construct validity of the items. A total no. of 76 items were loaded, whereas these items were split into six factors, namely, Inclusiveness (IN), Regulatory Bodies (RB), Consensus orientation (CO), Stakeholders participation (SP), political environment (PE) and performance (Perfr).

In addition, the factor loadings for all items ranged from 0.625 to 0.939, which satisfied the minimum criteria of 0.30 (Hair et al., 2010). Hence, table 4.59 indicates the results of factor analysis. Akinwunmi (2009) used factor loading matrix plots to check validity of constructs in his study entitled: An Investigation into Factors Affecting Housing Finance Supply in Emerging Economies.

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Table 4. 59: Loadings and Cross-Loadings for the Measurement Model

Items Inclusiveness Regulatory Consensus Stakeholders Political Performance Bodies orientation participation environment

IN1 .829

IN2 .828

IN3 .824

RB1 .939

RB2 .934

RB3 .920

CO1 .855

CO2 .829

CO3 .815

SP1 .887

SP2 .804

SP3 .787

PE1 .812

PE2 .728

PE3 .709

P1 .857

P2 .840

P3 .798

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

The most used extraction technique is the principal component analysis while others are image factoring; maximum likelihood factoring; alpha factoring; unweighted least squares and generalized least square. As a rule of the thumb, only variables with loadings greater than .32 are interpreted (Pallant, 2010). The greater the loading, the more the variable is considered to be a pure measure of the factor. Loadings in excess of 0.71 (50% overlapping variance) are considered excellent, 0.63 (40% overlapping variance) as very good, 0.55 (30% overlapping variance) as good, 0.45 (20% overlapping variance) as fair and 0.32 (10% overlapping variance) as poor (Tabachnick & Fidell, 2007). The number of factors to be retained can be decided using Kaiser’s criterion/Eigen value with factors of Eigen value of 1.0 or more being retained for further investigation (Kaiser 1960; Field 2000).

Extracted factors are explained through observed variables that measure the variability of the communality values (Field, 2009). The variables set in the study were used as interrelations

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represented that can be used as the smallest factor numbers to determine the procedure of factor extraction.

The factor solution are indicated when they do not fit well by small values, which the analysis tend to drop. There was a more than 0.5 value shown in the extraction communalities as shown in Appendix IX and it was acceptable indicating that the factor was well fitted with all other variables (Pallant, 2010).

Principal Components Analysis (PCA)

All the components data is set through extracting maximum variance, which is the Principal Components Analysis (PCA) main purpose (Tabachnick & Fidell, 2013). The initial Eigen values were used to explain the total variance of constraining factors, which are obtained from extracted components in Appendix X. The variables set were represented by interrelations represented by the factors determined by the Kaiser’s criterion to calculate the variance percentage (Hair et al., 2010).

Appendix X shows the 32 total factors from which seven factors were imputed using these criteria. The data’s variance was able to be explained by the seven factors (71%). A more than 1.6 value Eigen was found in the initial solution of the six factors, where a 1.0 Eigen value was detected in the threshold (Hair, Black & Babin, 2010). No redundant information was found when the original variables variability was explained by the fewer variables (Hair et al., 2010).

Before the rotation took place, the variance was explained as shown in Appendix X. 71% shows the extracted solutions by the seven factors in the explained cumulative variability, the Eigen values did not show any differences. The factor model cannot explain the original variables and variability which are unique due to the latent factors which make Eigen values to disappear as explained by the Eigen values variation (Hair et al., 2010). Ali et al. (2015) used PCA to show the extracted components obtained by constraining factors.

Conﬁrmatory Factor Analysis (CFA)

Conﬁrmatory Factor Analysis (CFA) was employed to test whether there exist a relationship between the observed variables and their underlying latent constructs (Hair et al, 2010). In

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the CFA model, 76 tems were loaded to best fit the sample data between observed and un- observed variables (Byrne, 2013). The items for the study variables were examined using confirmatory factor analysis (CFA) on the basis of EFA results to examine the dimensionality of each variable and to test the model fit of the factors of the study variables (Anderson & Gerbing, 1988). Each observed variable was assigned to one and only one latent variable as shown in figure 4.10 which confirmed that a relation exist between the observed and latent variables as shown by the correlations.

Figure 4.5: CFA Measurement Model for Study Variables

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Conﬁrmatory Factor Analysis was also done to measure the construct validity in the measurement model on multiple criteria such as convergent, internal reliability and discriminant validity. Bahl and Wali (2014) argued that convergent and discriminant validity is both suINategories of construct validity. Evidence that construct validity exist is demonstrated by presence of both discriminant and convergent validity. None alone is sufficient for measuring construct validity. Bryant and Kohn (2013) in their study on Housing Bubble Debate Resolved used CFA to measure both convergent and discriminant validity.

Greater than 0.5 factor loadings should be seen in the convergent validity (Pansuwong, 2009; Hair et al., 2010). High convergence thus was witnessed in this study as 0.7 value was seen as shown in table 4.60. Composite reliability (CR) suggests a value of 0.6 for acceptability which indicates internal consistency of the measurement model (Kline, 2005; Hair et al., 2010). As depicted in Table 4.29 the composite reliability (CR) value of all items ranged from 0.801 to 0.935 suggesting that high internal reliability of the data exist. Therefore, convergent validity was met. Taib, Ramayah and Razak (2008) used convergent validity on their study on Factors Influencing Intention to use of Diminishing Partnership Home Financing in the Middle East to measure the extent to which the underlying latent construct correlated to the observed variables that were designed to measure the same construct.

Table 4.60: Convergent Validity Constructs Composite reliability Average variance Extracted (AVE) INC 0.816 0.528 RB 0.913 0.639 CO 0.935 0.745 SP 0.880 0.598 PE 0.843 0.524 Perfr 0.808 0.702

Lack of relations between measures need to be shown that they really do not relate so as to ensure that discriminant validity is well established (Hair et al., 2010). In table 4.61, none of the loadings is greater than 0.7 demonstrating discriminant validity.

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Table 4.61: Discriminant Validity Construct INC RB SP CO PE PR INC 1.000 RB 0.215 1.000 CO 0.038 -0.063 1.000 SP -0.107 0.196 -0.030 1.000 PE 0.148 -0.115 0.051 0.163 1.000 PR -0.049 0.147 -0.074 -0.091 -0.137 1.000

Each of the constructs used the Cronbach’s alpha reliability coefﬁcient to compute and assess scale reliability. A greater than 0.7 value was shown in the study of the Cronbach’s alpha statistic, which ranged from 0.753 to 0.932. DeVellis (2003) and Nunnaly and Bernstein (1994) argued that the items consistency was determined by a coefficient alpha of more than 0.7 value. These therefore become the major recommendation for a Cronbach’s alpha statistic to always be more than 0.7. Valentini, Ippoliti and Fontanella (2013) to find out their reliability and validity on Modelling US Housing Prices by Spatial Dynamic Structural Equation Models evaluated the internal consistency, convergent validity, and discriminant validity.

Chi-Square Goodness–of- Fit Test

Either when the observed data tries to be fitted with a statistical model by an analyst, the data is thought to be well fitted or not or rather, how close observed values are fitted to the fitted model (Arbuckle & Wothke, 1999). The chi-square goodness of fit test is one statistical test that addresses the issue raised. Reinard (2006) posited that chi-square is one of the best traditional measure used in assessing overall model fit when the sample sizes are less than 200. This study employed chi-square since the sample size was less than 200. Chi-square goodness of fit was mainly employed in this study as it best represents the differences between the observed and estimated covariance matrices. A low value of Chi-square indicates that there is no difference between the observed and the theoretical model. The lower the Chi-square value the better the fit of the model indicating that the specified model

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was supported by the data (Arbuckle & Wothke, 1999). Table 4.62 shows that Chi-square goodness of fit test is significant at p<0.001.

Table 4. 62: Chi-square Goodness-of-Fit Test Chi-Square df Sig. 525.326 128 .000

4.11.2 Confirmatory Structural Model and Hypotheses Testing of the Study Variables The second step involved answering the study’s objectives where AMOS software version 21 was used for confirmatory factor analysis, measurement model and structural equation modeling (Schumacker & Lomax, 2004). Jackson, Gillaspy and Purc-Stephenson (2009) argued that SEM is largely a confirmatory technique rather than exploratory and the AMOS software can be used to perform CFA. In the same vein they noted that path analysis, factor analysis and regression are all special cases of SEM. In this study, SEM was used to test hypotheses and to fit the theoretical model. A study by Kohn and Bryant (2010) on factors leading to the U.S. housing bubble: A structural equation modeling approach used SEM to test the research hypothesis, fit theoretical model and statistical modeling.

The aspect of variables was used to outline the normality of the variable of each model. Before undertaking any further analysis, this helped in understanding of the structure through an exploratory data analysis (EDA). This method also helped to ensure that appropriate analytical data analyses techniques are employed appropriately. Model fit testing was then then done afterwards. Valentini, Ippoliti and Fontanella (2013) to find out their reliability and validity on Modelling US Housing Prices by Spatial Dynamic Structural Equation Models evaluated the internal consistency, convergent validity, and discriminant validity (Moss, 2009).

The absolute fit indices and incremental fit indices are the two main feting indices that the study considered (Hair et al., 2010). The study for absolute fit indices, together with Adjusted Goodness-of-Fit Index (AGFI) and Root- Mean-Square Error of Approximation (RMSEA) used the Goodness-of-Fit Index (GFI). For approximation, the Adjusted Goodness-of-Fit Index (AGFI) and Root- Mean-Square Error were used. The Comparative Fit Index (CFI) and Normed-Fit Index (NFI) were used for incremental fit indices.

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For the measurement model, table 4.32 shows results of the alternative goodness of fit test statistics for the CFA model. RMSEA for the study was .064. A rule of thumb is that RMSEA < .05 indicates close approximate fit; values between .05 and .08 suggest reasonable error of approximation and RMSEA > 0.10 suggests poor fit (Browne & Cudeck, 1993). The study’s RMSEA was considered a moderate fit. As depicted in Table 4.32, NFI was found to be a good fit with a value of 0.742. Kline (2005) suggested that the acceptable value of NFI in order to make it a good fit is NFI > 0.90. In the same vein, the inclusion of GFI is also of importance to expound the model fit. According to Kline (2005), GFI = 1.0 indicates a perfect model fit, GFI > 0.90 may indicate a good fit, and values close to zero indicate a very poor fit. However, values of the GFI can fall outside the range of 0 to 1.0. Values greater than 1.0 can be found with just-identified models or with over-identified models with almost perfect fit; negative values are most likely to happen when the sample size is small or when model fit is extremely poor. In consonance with these arguments, the present finding reports GFI > 0.90. This explained that the study’s model was within the acceptable range.

As for CFI, a rule of thumb for the CFI and other incremental indices is that values greater than roughly 0.90 may indicate reasonably a good fit of the researcher’s model (Hu & Bentler, 1999). The study’s CFI is exceeding 0.90, which leads to a conclusion that the study’s had a good fit for CFI. In summary, all the model fit measures of the measurement model achieved the minimum threshold level; hence, the measurement model for residential mortgage financing was appropriate. Bryant and Kohn (2013) in their study entitled A Housing Bubble Debate Resolved tested their research model using the goodness-of-fit test indicators which revealed that the values were within the range of recommended levels.

Table 4.32: Confirmatory Factor Analysis Model Fits Model CFI GFI AGFI NFI RMSEA Default model .910 0.737 0.679 0.742 0.064 Saturated model 1 1 1 Independent model 0 0.371 0.327 0 0.199

Influence of Inclusiveness of employees on Performance of county governments in Kenya 162

The first specific objective of this study was to establish the effect of inclusiveness of employees on the performance of county governments in Kenya. Normality test on the factors produced Skewness and Kurtosis values of between -1 and +1. The outliers were tested for each of the observations, with observations farthest from the centroid, Mahalanobis distance, being taken into consideration. There were no outliers detected. The values obtained in testing the model fit indices were within the thresholds as shown in table 4.33.

Table 4.63: Model- Fit Indices for the Influence of Borrower Characteristics on Performance of county governments in Kenya Model CFI GFI AGFI NFI RMSEA Default model .995 0.948 0.902 0.959 0.037 Saturated model 1 1 1 Independent model 0 0.371 0.327 0 0.437

The hypothesis to test for this specific objective was:

H01: There is no significant relationship between borrower characteristics and performance of county governments in Kenya.

Figure 4.6 shows there was a positive (regression weight = 0.40) and statistically significant relationship between inclusiveness of employees and performance of county governments in

Kenya. In this regard H01 was rejected. Therefore, this model was significant at 95% significance level (α-level 5% for a 2-tailed test). Popular α-levels are 10% (0.1), 5% (0.05), 1% (0.01), 0.5% (0.005), and 0.1% (0.001) (Fisher, 1926). The precision is lowered to capture the appropriate significance.

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Figure 4.6: Significance Test for Inclusiveness of Employees

Influence of Regulatory bodies on Performance of county governments in Kenya.

The second objective of this study was to establish the influence of regulatory bodies on the performance of county governments in Kenya. Normality test on the factors produced Skewness and Kurtosis values of between -1 and +1. The outliers were tested for each of the observations, with observations farthest from the centroid, Mahalanobis distance, being taken into consideration. There were no outliers detected. The values obtained in testing the model fit indices were within the thresholds as shown in Table 4.65.Table 4.64: Model Fit Indices for the Influence of Regulatory bodies on Performance of county governments in Kenya

Model CFI GFI AGFI NFI RMSEA Default model .966 0.888 0.816 0.922 0.087 Saturated model 1 1 1 Independent model 0 0.322 0.187 0 0.400 The hypothesis to test for this specific objective was:

H02: There is no significant relationship between regulatory bodies and performance of county governments in Kenya.

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Figure 4.7 shows there was a positive (regression weight = 0.33) and statistically significant relationship between regulatory bodies and performance of county governments in Kenya.

Therefore H02 was rejected. The null hypothesis was rejected at 95% significance level implying that there is a significant relationship between regulatory bodies and performance of county governments in Kenya.

Figure 4.7: Significance Test for Regulatory bodies

Influence of Consensus orientation practices on Performance of county governments in Kenya

The third objective of this study was to explore the influence of consensus orientation practices on the performance of real estate sector in Kenya. Normality test on the factors 165

produced Skewness and Kurtosis values of between -1 and +1. The outliers were tested for each of the observations, with observations farthest from the centroid, Mahalanobis distance, being taken into consideration. There were no outliers detected. The values obtained in testing the model fit indices were within the thresholds as shown in Table 4.35.

Table 4. 65: Models Fit Indices for the Influence of Consensus orientation practices on Performance of county governments in Kenya Model CFI GFI AGFI NFI RMSEA Default model .995 0.948 0.902 0.951 0.036 Saturated model 1 1 1 Independent model 0 0.390 0.216 0 0.422 The hypothesis to test for this specific objective was:

H03: There is no significant relationship between consensus orientation practices and performance of county governments in Kenya.

Figure 4.8 shows there was a positive (regression weight = 0.66) and statistically significant relationship between consensus orientation practices and performance of county governments in

Kenya. Therefore H03 was rejected. The null hypothesis was rejected at 95% significance level implying that there is a significant relationship between consensus orientation practices and performance of county governments in Kenya.

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Figure 4.8: Significance Test for Consensus orientation practices

Influence of Stakeholders’ participation on Performance of county governments in Kenya

The fourth objective of this study was to determine the influence of stakeholders’ participation on the performance of county governments in Kenya. Normality test on the factors produced Skewness and Kurtosis values of between -1 and +1. The outliers were tested for each of the observations, with observations farthest from the centroid, Mahalanobis distance, being taken into consideration. There were no outliers detected. The values obtained in testing the model fit indices were within the thresholds as shown in table 4.36 167

Table 4.66: Models Fit Indices for the Influence of Stakeholders’ participation on Performance of county governments in Kenya Model CFI GFI AGFI NFI RMSEA Default model .995 0.939 0.895 0.949 0.034 Saturated model 1 1 1 Independent model 0 0.382 0.227 0 0.398 The hypothesis to test for this specific objective was:

HO4: There is no significant relationship between stakeholders’ participation and performance of county governments in Kenya.

Figure 4.14 shows there was a positive (regression weight = 0.62) and statistically significant relationship between stakeholders’ participation and performance of county governments in

Kenya. Therefore H04 was rejected. The null hypothesis was rejected at 95% significance level implying that there is a significant relationship between stakeholders’ participation and performance of county governments in Kenya. A study by Kalui and Kenyanya (2015) on Selected Factors hindering Access to Mortgage Finance in Kenya found out that stakeholders’ participation play a significant role in the performance of county governments in Kenya. Their study demonstrated that stakeholders’ participation is a major determinant of success in real estate firms as majority of them opt for adjustable mortgage rate to fixed rate mortgages.

This finding also agreed with Coulibaly and Li (2009) in their study on Choice of Mortgage Contracts. Evidence from the Survey of Consumer Finances which found out that stakeholders’ participation tend to dominate the choice of mortgage rate where preference for adjustable rate mortgages to fixed rate mortgages attracted majority of the borrowers. This has an influence on the performance of county governments in Kenya as residential houses may become more affordable in the future should interest rates fall for an extended period of time. The findings of this study illustrated that preference for fixed rate mortgages was low an indication that preference of variable mortgage rates remains high in the mortgage industry and real estate firms should therefore align their business models to this reality for them to

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record better returns in the long run. The findings were supported by Sven and Erik (2015) study entitled The Myopic Choice between Fixed and Adjustable Rate Mortgages in Flanders which demonstrated that majority of real estate firms have a strong preference for adjustable rate mortgage to fixed rate mortgages. The fact that mortgage lending institutions avail a variety of mortgage rates where borrowers are able to choose depending on their current and projected flow of income is a clear manifestation that those organizations which are highly focused in providing a variety of products are likely to record superior performance (Eisingerich et al., 2009). Likewise, real estate firms seeking improved performance should provide a wide range of housing products tailored to meet the needs of customers. This would emerge as strength or an advantage that such firms would have over their business rivals thereby increasing the size of their market segment in the long-run.

Figure 4.9: Significance Test for Stakeholders’ Participation

Effect of Moderation of Political Environment on the Relationship between corporate governance and performance of county governments in Kenya

The fifth objective of this study was to assess the moderating effect of political environment on the relationship between residential mortgage financing practices and performance of

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county governments in Kenya. Normality test on the factors produced Skewness values and Kurtosis of between -1 and +1. The outliers were tested for each of the observations, with observations farthest from the centroid, Mahalanobis distance, being taken into consideration. There were no outliers detected. The values obtained in testing the model fit indices were Table 4.38 indicates the model fit indices for the predictor variables and the dependent variable (performance of real estate) which were found to be within the acceptable thresholds.

Table 4.67: Model- Fit Indices for the Overall Structural Equation Model CFI GFI AGFI NFI RMSEA Default model .901 0.916 0.907 0.946 0.075 Saturated model 1 1 1 Independent model 0 0.380 0.324 0 0.191

The hypothesis to test for this specific objective was:

H05: Political environment do not moderate the relationship between residential financing practices and performance of county governments in Kenya.

Two structural models were used to test the objective. Model 1 represented the structural equation model (SEM) while model 2 represented overall SEM with moderation. Figure 4.10 shows the structural equation modeling (SEM) for the sixth objective. Regression weights were used to determine the direction and strength of the variables.

Table 4.39 shows regression weights for borrower characteristics was 0.36; for regulatory bodies 0.41; for consensus orientation practices 0.49; for stakeholders’ participation 0.64; for 0.07 for underwriting criteria and political environment 0.70. Figure 4.10 in Model 1, also shows that, there was a strong relationship between predictor variables and performance of real estate (R2 = 0.72). An R2 of 0.72 indicate that 72 % of the variations in performance in real estate firms were explained by the model.

Table 4. 68: Overall T-Statistics Value without Moderation Estimate S.E. C.R.

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IN -> PERF 0.361 0.051 7.078

-> PERF RB 0.412 0.055 7.490

-> PERF CO 0.491 0.044 11.159

-> PERF SP 0.640 0.063 10.158

Figure 4. 10: Structural Equation Model

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4.11.3 Confirmatory Structural Equation Model with Moderation

The structural equation modeling (SEM) for the sixth objective for model 2 is as shown in figure 4.18. Normality test on the factors produced Skewness values of between -1 and +1. The outliers were tested for each of the observations, with observations farthest from the centroid, Mahalanobis distance, being taken into consideration. There were no outliers detected. The values obtained in testing the model fit indices for the predictor variables and the dependent variable and the moderator were found to be within the acceptable thresholds as shown in table 4.70.

Table 4.69: Model- Fit Indices for the Effect of Moderation on the Relationship between Residential Mortgage Financing Practices and Performance of county governments in Kenya CFI GFI AGFI NFI RMSEA Default model .908 0.918 0.902 0.939 0.075 Saturated model 1 1 1 Independent model 0 0.397 0.356 0 0.176

Model 2 shows the results after Structural Equation Modeling (SEM) with moderation was carried out. Regression weights were used to determine the direction and strength of the factor. From figure 4.18, path coefficient regulatory bodies 0.45; consensus orientation practices was 0.53, for stakeholders’ participation 0.66 and for underwriting criteria 0.09. The results show that with the introduction of the moderator, the effect of political environment on performance of county governments in Kenya improved. R2 was used to show the proportion of variation in dependent variable explained by the structural equation modeling (SEM) model. Aiken and West (1996) posited that moderation occur when variable M alters the relationship between the variables X and Y, by enhancing, strengthening or weakening the relationship. In order to determine the function of the moderator, difference in R2 as recommended by Carte and Russell (2003) was used.

The results shows a coefficient R2 = 0.76 which is higher than that of explanatory variables of 0.72. Model 2, shows a strong relationship between independent variables and performance in real estate firms. Inclusion of interaction term resulted in an R2 change of 4%. An R2

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change of 4% indicates that, moderating effect explains 4% variances in performance of county governments in Kenya above and beyond the variance explained by explanatory variables. This shows a significant presence of moderating effect of political environment on the relationship between predictor variables and performance of county governments in

Kenya. The null hypothesis H06 was rejected and the study therefore concluded that political environment do moderate the relationship between residential mortgage financing practices and performance of county governments in Kenya.

4.12 Chapter Summary

This chapter covered the study results. Presentation of findings is in frequency tables and descriptive tables with mean and standard deviations. It is aligned to the study objectives and covered five variables that are stakeholders’ participation, inclusiveness, consensus orientation, regulatory bodies and political environment on the effect of performance on county governments. The chapter provides validity and reliability analysis for the research instrument. This was followed by the demographic data to explore the eligibility of the respondents to participate in the study. The descriptive statistics together with inferential statistics for each variable were done and finally the overall inferential statistics were given. Chapter 5 follows hereafter.

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CHAPTER FIVE

5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

Chapter five includes key data findings as discussed, conclusions deduced from the study results and deduced recommendation. The conclusions as well as recommendations were deduced from the findings and addressed the study objectives.

5.2 Summary

The study explored the corporate governance effect on Kenya’s County Governments’ performance. The reviewed corporate governance aspects affecting the County Governments performance were inclusiveness of employees, regulatory bodies, consensus orientation practices and stakeholders’ participation and political environment. An explanatory and descriptive cross-sectional survey design was used. Gathering of data was done using pretested questionnaires that were administered on 354 respondents. All the completed questionnaires were entered into SPSS version 24.0 statistical software and data analyzed for descriptive statistics and inferential statistics. Results were presented in tables showing the frequencies, percentages, means, standard deviation as well as coefficient of variation.

5.2.1 Influence of Inclusiveness of Employees on Performance of County Governments

From the regression analysis, it was found that a unit change in inclusiveness would lead to 1.581 units change in performance of county governments Pearson correlation findings. The study also found that performance and inclusiveness had a positive and significant association as shown by r= 0.497 and p-value=0.00. Further from the descriptive statistics, the study found that county governments have adopted capacity building programs directed at ensuring employees have the same goals and that the county ensures fair recruitment procedures. Moreover, county staff have developed skills that make performance of their work easy and that their training structure is enhanced to ensure participation of all

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stakeholders. In addition, employees are provided with the best place to work and they train their employees on technical skills and self-improvement so as to enhance productivity. Further, the counties regularly review their employees’ welfare to incorporate cultural diversity and ensure gender balance to promote equality. However, employees are not able to address customer needs and complaints quickly and equally to all residents.

5.2.2 Functions of Regulatory Bodies on Performance of County Governments

From the regression analysis, the study found that if regulatory bodies change by one unit then there would be 2.247 units change in county governments’ performance in Kenya. The correlation results showed that performance of county governments in Kenya and the regulatory bodies were strongly, positively and significantly correlated as shown by r= 0.691 and p-value=0.00. Further, from the descriptive statistics, the study indicated that the regulations set by the Public Procurement Regulatory Authority regulate and shape the county’s procurement procedures and that county governments have checks and balances at all stages of public funds utilization and that they have created effective communication procedures from the managing team to other members.

Again, the results indicated county governments that have created fair working conditions that favor investment and trade have performed well in fund management compared to other counties, and their regulatory bodies enhance that market openness. Further, the results of the study indicated that the set regulations enhance networking with other like-minded counties so as to satisfy the public needs of the county and that regulatory conditions are set to motivate co-ordination with other counties.

Finally, the study established that regulatory bodies rarely create a risk in managing the county and that counties have created effective communication procedures from the managing team to the members of the public.

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5.2.3 Influence of Consensus Orientation Practices on Performance of County Governments

From the regression analysis, the study found that an increase in consensus orientation would lead to a 2.151 increase in county governments’ performance in Kenya. The correlation results also found that performance of county governments in Kenya and the consensus orientation were strongly, positively and significantly correlated (r= 0.654 and p- value=0.00). Further from the descriptive statistics, the study found that county governments input plays a valuable role in the implementation of the county strategic plan and that a governor communicates priorities to his/her subordinates. Moreover, the results indicated that county governments ensure that the public understands the county’s priorities and that the county recognizes and protects the rights of all residents and stakeholders.

Further, it was revealed that county workforce work together to promote increased commitment from all stakeholders and that the counties have realized that high involvement at all work levels lead to greater individual efficiency thus, greater overall performance. In addition, the county directors work in consultation with other stakeholders and that funds use information is displayed publicly for all to access and that managers involve non-supervisory level employees through practices that offer a better understanding of the county performance mission. Further, the findings show that the county government management through the County Executive Committee (CEC) has not resulted in fair and equitable funds- use resulting to a decrease in the risk of fraudulent exercises.

5.2.4 Influence of Stakeholders’ Participation on Performance of County Governments

From the regression analysis, the study further found that increase in stakeholder’s participation would lead to a 2.982 increase in the county governments’ performance in Kenya. The correlation results also revealed that county governments performance in Kenya and the stakeholder participation were strongly, positively and significantly correlated (r= 0.866 and p-value=0.00). Further from the descriptive statistics, the study found that there are consultations on issues affecting project performance in the county and that members of the public are provided with a platform to exercise their oversight functions.

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Moreover, the county encourages investor participation in county development plans and the County Government ensures effective communication to ensure the public understands the counties’ next point of action and that implementation of new projects is a collective responsibility that involves all, that innovative solutions are as a result of stakeholder involvement to share in solving development challenges facing the county, that civic education units have been established for educating citizens on their rights in county, and that monitoring of county operations is a collective responsibility that involves all stakeholders. The study finding further showed that the county government ensures that both individuals and groups of people are given responsibilities to ensure the success of identified projects within the county but rarely do members of the public take part in budgeting.

5.2.5 Moderating Effect of Political Environment on Corporate Governance and Performance of County Governments

From the regression analysis, the study further found that a unit change in political environment would lead to 0.869 units change in performance of county governments. From the correlation findings, it was clear performance of the county governments and political environment werestrongly and positively correlated (r=0.856 and p-value=0.00).

Further from the descriptive statistics, the study found that the governor has a good working relationship with the county, that their county’s legislative bodies are neutral and ensure awareness raising is done to attract investors, and that county executives ensure that development is distributed equally throughout the county regardless of political pressures.

On the same, the study revealed that county governments ensure professional associations with other counties despite their varied political attachment and that the county prioritizes developments based on public interest rather than political pressures. Also, trade associations have not increased as a result of the county’s political activities and that the county’s political affiliation with the National government influences budget authorization.

The findings indicated that the political setting barely influences control of revenue to county governments’ preferred areas and that the political setting does not influence planning and

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development while the political setting does not lead to a mismanagement of finances in the county leading to a decrease in investors and investment. Nevertheless, county’s legislative bodies are neutral and ensure awareness measures are created so as to attract investors.

5.3 Discussion

5.3.1 Influence of Inclusiveness of Employees on Performance of County Governments

The study finding showed that there is a strong correlation coefficient between performance and inclusiveness where a unit change in inclusiveness changes would lead to units change in performance of county governments. This is consistent with the view of Karamanou and Vafeas (2015) who suggest that the implementation of inclusiveness strategic priorities involves establishing a widespread understanding of, and commitment towards, these priorities. Effective inclusiveness strategies enhance performance by ensuring employees are able to address customer needs and complaints quickly and equally to all residents, employees are provided with the best place to work, staff develop skills that make performance of their work easy and this is as a result of the organization ensuring they practice fair recruitment procedures.

In addition, the study found that county governments have adopted capacity building programs directed at ensuring employees have the same goals. This is in line with Punch (2016) who explained these factors include training structure aimed to ensure participation of all stakeholders, adopting capacity building programs directed at ensuring employees have the same goals, training employees on technical skills and self-improvement so as to enhance productivity, regularly review of employee welfare to incorporate cultural diversity and ensuring gender balance to promote equality.

The finding shows that the county ensures fair recruitment procedures. This is similar to Manyuru and Mutisya (2012) who elaborated that fair recruitment procedures are the main indicator in the Nairobi Securities Exchange listed performance of the firm. It was revealed the association between the funds management and corporate governance was positive. According to the findings managerial discipline, annual board meetings and the shares proportion that top shareholders are holding were found to considerably and positively affect 178

performance of firms. Moreover, county staff have developed skills that make performance of their work easy. This is coherent to Ongore and K’Obonya (2011) study on incentives in principal-agent relationships that examined the interrelations of the employee operations and director attributes and firm funds management in fifty-four firms listed at the NSE. Governance was measured as far as possession focus, proprietorship personality, board viability and administrative efficiency; while financial performance was measured using ROA, ROE and DY. They found a huge positive connection between foreigner, insider, institutional and differing proprietorship structures and performance.

In contrast the connection between representative operations and government, and performance was altogether negative. The responsibility of the board was observed to be of next to no esteem, predominantly because of an absence of adherence to the company structure. Managerial discretion and performance were found to be positively significant.

Similarly, the findings show that training structure is enhanced to ensure participation of all stakeholders. This is according to Mizruchiand Stearns (2013) who conjectured that, the act of profit administration is methodically identified with the training structure of interior top managerial staff, trustees, inward review work and the decision of outer reviewer.

In light of a wide cross-sectional example of 434 recorded Australian firms, for the money related year finishing off with hypothesized that, the act of profit administration is methodically identified with the quality of interior CG instruments, such as top managerial staff, review of trustees, inward review team and the decision of outer reviewer. In light of a study of 434 recorded firms in Australia in 2010, they found that the presence of a majority of none official directors on the board and on the review advisory group to be connected with a lower profit administration.

In addition, employees are provided with the best place to work. This is in line with Cubbin and Leech (2016) who suggests that employee involvement and welfare, played an important dimension on performance and organization’s business execution.

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Finding indicates that county governments train their employees on technical skills and self- improvement so as to enhance productivity. This is in conjunction with Karamanou and Vafeas (2015) who found out that in every effective market, stakeholders would redact the wanted price that a portion of the company is willing to pay and the needed stage of administrative agency costs. This was much affirmed that for a company’s corporate governance they need to improve its returns to organizations stakeholders, and also the stock market ought to be adequate so that the share prices reproduce major value. This was emphasized that for an organization’s corporate governance actions to have an impact on the value of market, two factors must be applied. Increasing of returns is the first factor to the company’s stakeholders and the stock market ought to be effective so as to share prices reveal important aspects.

Further, they regularly reviewed their employee’s welfare to incorporate cultural diversity, which is in line with Lins, and Miller‘s (2014) study that tested if inclusiveness proprietorship as a strategy of corporate governance supported by the best practice programs is efficient in enhancing performance. Also, county governments ensure gender balance to promote equality. This corresponds to Tauringana and Chamisa (2014) study on evaluating the influence of inclusiveness in enhancing performance.

The study found that effective inclusiveness strategies enhance performance. However, the study finding shows that employees are not able to address customer needs and complaints quickly and equally to all residents. Tam and Tan (2016) studied the ownership, governance and performance in Malaysia by sampling ninety-three firms quoted on the Malaysia Stock Exchange for between 2009 and 2014. The findings were that the inclusiveness process was significantly positively related to performance.

5.3.2 Functions of Regulatory Bodies on Performance of County Governments

The study findings showed a strong correlation coefficient between performance of county governments in Kenya and the regulatory bodies. This is in line with, Kapopoulos and Lazaretou (2011) study on factors influencing county performance found that regulatory bodies are positively related to the service offered.

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The regulatory bodies were found to be influenced by fund management, having checks and balances at all stages of public funds utilization and having effective communication procedures from the managing team to stakeholders. This is in line with Kihara (2016) who studied the relationship between corporate governance rules and performance of NSE firms and found no important link between stakeholders’ rights protection, which were indicators of rules in governance among corporates and firm performance. However, an important positive association amongst ethics and performance of the firm was found.

The study found that the county had created fair working conditions that favor investment and trade. It was also found that having regulations set by the Public Procurement Regulatory Authority to regulate and shape the county’s procurement procedures enhanced performance. Further from the descriptive statistics, the study indicated that the regulations were set by the Public Procurement Regulatory Authority to regulate and shape the county’s procurement procedures. This was in line with Caplan (2014) study on interior panels and the fraud detection examined the how the performance management in an emerging market as one of the variables by considering the case of Thailand is influenced by corporate governance regulations. The study used 320 listed companies from year 2010 to 2015 with a great cross- section.

They found that a standard deviation increment in the implicit rules appropriation file was identified with a 10% expansion in normal firm esteem while controlling for firm-particular elements and industry impacts. The finding shows that county governments have checks and balances at all stages of public funds utilization. This is in line with Ho (2015) study on corporate competitiveness studied the control and enforcement of company ascendency by the capital markets authority in Tokyo, Japan.

The study found that the authority has put in place various measures and reporting requirements for listed companies, which essentially act as a guideline. Control and enforcement of the rules/ guidelines is affected through various means including use of fines and penalties. This study concluded that there is, however, varying levels of control and enforcement of the rules and guidelines against prescribed measures.

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Results of the study showed that county governments have created effective communication procedures from the managing team to the members of the public. This is in an agreement with Ngumi (2016) who surveyed the corporate governance rules in the Housing Finance Company of Kenya and found that HFCK had effective corporate governance rules as recommended by the various banking industry stakeholders. Both regression and correlation analysis was used to test the hypothesis. Findings show that the board of HFCK is in charge of the general administration of the bank and is focused on guaranteeing that its business and operations are led with honesty and in consistence with the law, universal acknowledged standards and best practices in corporate governance.

Again the results the study indicates that county governments have created fair working conditions that favor investment and trade. This abides with Lang’at (2016) who studied corporate governance rules and funds management of NSE-listed firms and found that communication procedures and ethics as corporate governance rules dimensions were all positively related to firm performance.

In addition, the county has performed well in fund management compared to other counties that their regulatory bodies enhance market openness. This is in line with Kihara (2016) who studied the relationship between corporate governance rules and performance of NSE firms and found no important link between stakeholders’ rights protection, which were indicators of rules in governance among corporates and firm performance. However, an important positive association amongst ethics and performance of the firm was found.

Further the study finding indicates set regulations enhance networking with other like- minded counties so as to satisfy the public needs of the county. This agrees with Ong’wen (2017) who conducted a study in NSE examining the connection of business supremacy rules and fiscal presentation in quoted companies of the NSE, he pursued on establishing whether the featured companies that adopted the provisions of corporate governance rules outperformed the ones that stuck to the minimum provisions. Also, the regulatory conditions are set to motivate co-ordination with other counties. This is similar to Caplan (2014) in his study on corporate governance and development where the author tried to focus on the

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governance rules and share price movement to measure performance capacity of a firm. The findings show that adoption of the corporate governance rule as a strategy brought more profits to the firms and enhanced performance.

Again, regulatory body rarely creates a risk in managing the county. Kihara (2016) studied the relationship between corporate governance rules and performance of firms listed in the Nairobi Securities Exchange and found no significant relationship between protection of stakeholders’ rights, which were indicators of corporate governance rules, and firm performance. The study however found a significant positive relationship between ethics and firm performance.

Finally, the results showed that counties have created effective communication procedures from the managing team to the members of the public. This is in line with Mwirichia (2013) who conducted a survey on International Comparative Analysis of corporate governance disclosures among Kenyan firms quoted at the Nairobi Securities Exchange compared with other emerging economies. The study findings show that NSE-listed companies report more comprehensively and the gap between good and poor are narrow; Companies in the financial sector were found to use more intensive communication procedures with their shareholders than non-financial companies.

5.3.3 Influence of Consensus Orientation Practices on Performance of County Governments

The study finding illustrated a strong association between performance of county governments in Kenya and the consensus orientation and that change in one unit of consensus orientation led to increased performance of county governments in Kenya. This is in an agreement with Khanna and Palepu (2015) on a study on group affiliation profitable in emerging markets investigated the relationship between 52 firms on the Istanbul Stock Exchange performance and corporate governance practices. There was higher financial disclosure among Turkish firms but lower skilled employees and also there exists a positive association among public disclosure, accountability, transparency and firms’ performance.

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Further from the descriptive statistics, the study found that county governments input, plays a valuable role the implementation of the county strategic plan. This is in line with Weir and Laing (2010), study that discovered that in the area of corporate governance matters management is probably not going at a generally poor state currently a source of confidence in United Kingdom-listed firms’ results.

The review was planned to answer whether better corporate governance resulted in higher shareholder assurance and if it impacts the share trading system, and whether securities exchange improvements are identified with private capital accumulation.

The findings also showed that the governor communicates what he/she feels should be prioritized to his/her subordinates. This is in conjunction with Tamer (2015) who conducted a review of 200 institutional financial specialists over the world. He established investors were willing to pay higher to invest in well-managed organizations. The findings also found that over half of the financial specialists agreed that corporate governance is critical to any form of business. Moreover, the results indicated that county governments ensure that the public understands the county’s priorities.

This agrees with Tariff (2012) who investigated whether corporate governance consistence matters for firm performance, including both market-based and accounting measures of performance in the Middle East and North Africa. They found that there was a reasonable connection amongst consistence and the market-driven measures of performance. That growing consistence was prompting expanding all out shareholder come back from the examined organizations. No confirmation of such a relationship was nevertheless, found amongst consistence and the accounting measures of performance of the company.

In addition, the findings showed that the county recognizes and protects the rights of all residents and stakeholders. This is in line with Kang and Stulz (2011) carried out a study on performance effects of transparency and disclosure and board of directors in Turkish firms. He used a sample population of 100 companies that were listed at the Turkey stock exchange in the periods between 2009 and 2013. In his study, he divided transparency in to three levels: - total transparency, three categories of transparency and disclosure and finally the

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twelve categories of transparency and disclosure. He used ROA and Tobin Q as funds management indicators and concluded that in the first level total transparency and disclosure is not related to any of the performancemeasures since there was a 10% significant level. In the second level transparency and disclosure affect firms’ value in terms of investment opportunity since there was 5% significant level. Further, from the results, county workforce work together to promote increased commitment from all stakeholders. This is similar to Noe and Tice (2014) in a study of corporate governance structure and performanceof Dubai manufacturing companies found a positive link between share price and good corporate governance practice. The study concludes direct connections exist between corporate governance levels and share price performance.

Moreover, the counties have realized that high involvement at all work levels lead to greater individual efficiency thus, greater overall performance. This corresponds to Durnev and Kim (2015) who did a study on corporate governance practices in Turkish firms with the intervening variable being transparency and disclosures. The study examined practices of disclosure in organizations in Turkey listed on the Istanbul Stock Exchange. Turkey’s Corporate Governance Forum, their standards and poor governance looked and assessed the reaction to control and the market conditions by directing the review more than three progressive periods with the goal of giving near understanding of divulgence of organizations in Turkey.

Additionally, the county directors work in consultation with other stakeholders. This is in line with Michel (2012) who studied the banking companies in Korea and disclosure levels in yearly reports. The result showed banks comply with the regulations in regard to compulsory discovery. Furthermore, the study revealed that funds use information is displayed publicly for all to access. This is in conjunction with Grossman and Hart (2014) who evaluated the costs and benefits of ownership and specifically focused on corporate governance practices score to operating sustainable performance management for the Karachi telephone service firms. They based their research findings on 5 firms that were quoted in the stock exchange. They found a positive correlation between the practices on performance of the entities. It was also found managers incorporated workers in non-supervisory level through activities leading

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to understanding of the county performance mission. This reflects study by Nyokabi (2016) who found that a more extensive structure ought to consider every single real stakeholder in the governance mosaic, including those in and out of the firm. For example, the inspector assumes a huge part in observing budgetary report quality and subsequently can be seen as an imperative member in the governance procedure.

Similarly, the findings showed that the county government management through the County Executive Committee (CEC) has not resulted in fair and equitable funds-use resulting to a decrease in the risk of fraudulent exercises. This is in line with Okwiri (2016) who studied the determinants of Kenyan companies in the yearly reports on voluntary disclosure. The general and strategized, capital, looking forward and information from the board were the factors that the study accessed that were linked to voluntary disclosure.

The findings revealed that civic education units have been established for educating citizens on their rights in county development, the county encourages investors participation in county development plans and that the County Government ensured effective communication aimed at improving public understands of the counties’ next point of action.

Nevertheless, there was a growing consensus that the respondents’ input played valuable part as the county implemented its strategic plan. This agrees with Kibua and Mwabu (2016) who did a study on the performance of Regulatory State Corporations in Kenya to find out the relationship between their sustainable capacity and corporate governance. Corporate governance practices included employee skills and fairness in service administration.

5.3.4 Influence of Stakeholders’ Participation on Performance of County Governments The study found that there are consultations on issues affecting project performance in the county. This concurs with Churchill and Iacobacci (2010) who did a study which found that the average basic markers used as a part of scholarly research and institutional rating administrations have extremely restricted capacity to clarify administrative conduct and organizational performance.

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Therefore, the findings suggested that a more extensive structure ought to consider every single real stakeholder in the governance mosaic, including those in and out of the firm. For example, the inspector assumes a huge part in observing budgetary report quality and subsequently can be seen as an imperative member in the governance procedure. Members of the public were provided with a platform to exercise their oversight functions.

This is in line with Gibson (2013) who argues that the boards ought to have an ability of trust in managing the company in ways that bring long term and supportable value, whereas at the same time putting into consideration their connection with greater stakeholder groups that have the workers, consumers, suppliers and the community who are affected by their actions. The relationship of stakeholders has significant effects on performance both directly and indirectly.

It was clear that the counties encourage investor’s participation in county development plans. This correlates with Motwani and Klein (2016) who found that the ideals of stakeholders’ standards and poor governance looked and assessed the reaction to control and the market conditions by directing the review more than three progressive year-periods giving near understanding of practices adopted by entities in Turkey. Donaldson and Lorsch (2013) also argued that stockholders have more prominent motivators to screen firm’s success since they get more prominent advantages from checking.

Most of the County Governments ensures effective communication to ensure the public understands the counties’ next point of action. This conforms to Tam and Tan (2016) who noted that administration might put passive, agreeable individuals on the board that may fulfill administrative necessities, however, are hesitant to test administration. The findings demonstrate that the organization's had to pay a board of trustees that reliably granted over the top rewards to administration despite the association's moderately sub-par performance. The discoveries demonstrate that different performers and systems are an asset; additionally, it impacted governance in huge ways and are fundamental to protecting the enthusiasm of an organization's stakeholders. Cases of such components incorporate, however are not restricted to controllers, administrators, financial investigators, stock trades, courts and the

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lawful framework, and the stockholders. The study established that implementation of new projects is a collective responsibility that involves all stakeholders. This agrees with Oxelheim and Randøy (2013) who argue that there is a linkage between stakeholder’s involvement and company performance. To note, the companies sampled establish the stakeholders’ involvement in monitoring and evaluation of the projects. Stakeholders’ involvement further led to a better quality of governance, early detection of financial misappropriations and further transparency was increased. The study revealed innovative solutions are as a result of stakeholder involvement to share in solving development challenges facing the county. It was also found that civic education units have been established for educating citizens on their rights in county development.

This agrees with Tariff (2012) who found that civic education units have been established for educating citizens on their rights in county development. The counties encourage investors’ participation in county development plans and that the County Government ensured effective communication aimed at improving public understands of the counties’ next point of action.

The study made it clear that monitoring of county operations is a collective accountability requiring all stakeholders. The study further deduced that the county governments ensure that both individuals and groups are given responsibilities to ensure the success of identified projects. This is in line with studies by Meek, Roberts and Gray (2011) who found that in auditing, corporate governance mechanisms such as stakeholders’ involvement helps inner control to create proficiency and avoid extortion, and they improve the nature of interior reviews and raise their individuality. This decreases the desire for review among shareholders. They concluded that solid governance within corporates improves the nature of financial processes consequently influencing reviewers' choices. The end results are, there is a significant influence between stakeholder’s involvement and performance of the multinational corporations.

The study made it clear that members of the public do not take part in budgeting. This is contrary to Megginson and Netter (2015) who in their study concluded that corporate governance improved margins ensuring external capital access is enabled thus makes

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economic development sustainable. This therefore indicts that corporate performance ought to be measured according to the level of satisfaction of all shareholders in a company. This shows that corporate governance is responsible to most of the stakeholders.

5.3.5 Moderating Effect of Political Environment on Corporate Governance and Performance of County Governments

From the correlation results, a strong and positive correlation between performance and political environment was found. The study found that the Governors have a good working relationship with the county assembly. These findings are in line with Mandaci and Gumus (2010) who on their study noted that administration might put passive, agreeable individuals on the board that may fulfill administrative necessities however are hesitant to test administration. The findings demonstrate that the organizations had to pay board of trustees that reliably granted over the top rewards to administration despite the association's moderately sub-par performance.

The study also revealed that the county’s legislative bodies are neutral and ensure raising awareness is done to attract investors. This concurred with the findings of Megginson and Netter (2015), which concluded that prudent corporate governance improved margins, ensuring access to external capital is enabled thus making economic development sustainable. This therefore indicts that corporate performance ought to be measured according to the level of satisfaction of all shareholders in a company.

The study further established that county executives ensure that development is distributed equally throughout the county regardless of political pressures. Koh (2015) who conducted a review of 200 institutional financial specialists over the world and established that when it came to well managed organizations, investors were willing to pay higher.

The findings also found that over half financial specialists shared the view that corporate governance was critical to any business. Over 70 per cent financial specialists indicated readiness to pay higher for decently managed organizations. 78 per cent respondents said long-term shareholder esteem was increased by Corporate Governance.

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Moreover, the study revealed that county governments ensure professional associations with other counties despite our political attachment. This finding concurs with Caplan (2014) who investigated whether corporate governance consistence mattered in reference to an entity’s performance in Middle East and North Africa. They found there was a reasonable connection amongst consistence and the market driven measures of performance.

That growing consistence was prompting expanding all out shareholder come back from the examined organizations. No confirmation of such a relationship was nevertheless, found amongst consistence and the accounting measures of the company's performance capacity. The study also found that the county prioritizes developments based on public interest rather than political pressures.

This concurs with Dvorák (2015) in his study on corporate governance and development on the tide‘s gone out as he focused on the link between governance rules and movement of share prices to measure performance capacity of a firm.

The findings show that adoption of the corporate governance rule as a strategy brought more profits to the firms and enhanced performance. It was clear that trade associations have not increased as a result of the county’s political activities and that the county’s political affiliation with the National government influences budget authorization. These findings were in line with Kihara (2016) who on a study on corporate governance rules and performance of NSE-listed firms, did not find any relationships between protection of stakeholders’ rights which were indicators of corporate governance rules and firm performance. However, a positive significant relationship between ethics and performance of firms was found.

The findings indicated political setting barely influences control of revenue to county governments preferred areas. This finding was in agreement with Lev and Sunder (2012) whose study findings on county financial performance established that there was a distinct increase in revenue collection that was higher than the inflation rate, there were fewer cases of fraud, the county was able to prosecute more people on fraud issues and there was value for money in every project the county had undertaken. Findings further show that payments

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to county suppliers and contractors were done fast with few delays and that revenue loss loopholes had been sealed to a great extent.

It was also clear that the political setting does not influence planning and development in most of the counties. The political setting does not lead to a mismanagement of finances in the county leading to a decrease in investors and investment. This was in agreement with Modigliani and Miller (2015) on their study where they noted that the quality of education in the technical and vocational training institutions was improved as well as access to wholesome water to residents and that to improve the county’s performance, rural roads needed to be been upgraded and for decentralized framework of service provision to be effective then there was need to have sufficient fiscal resources collected from the counties and received from the central government.

5.3.6 Performance of County Governments

The study revealed that most of the counties had a distinct increase in revenue collection that is higher than the inflation rate. This is in line with a study by Cascio (2014) on county performance in Bulgaria highlights seven parameters that are used to measure performance of counties which included perspectives on consumers/clients, internal processes, financials, growth as well as learning, social, environment and competitive advantage.

According to the study findings financial perspective and customer perspective had the highest score which were as a result of reduced cases of fraud and corruption within the county and this was measured with the extent to which the county residents were happy with the services offered.

It was also revealed that payments to county suppliers and contractors were done fast with few delays. The study also found that revenue loss loopholes had been sealed. This is in accordance to Lev and Sunder (2012) whose study findings on county financial performance found that there was a distinct increase in revenue collection that was higher than the inflation rate, there were fewer cases of fraud, the county was able to prosecute more people on fraud issues and there was value for money in every project the county had undertaken. Findings further show that payments to county suppliers and contractors was done fast with

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few delays and that revenue loss loopholes had been sealed greatly. Similarly, the study revealed that money was valued in every project the county had undertaken. This concurs with a study conducted by Modigliani and Miller (2015) on counties and how they measure their performance to ascertain their growth found that this was through improved effectiveness, which involves establishing benchmarks and determining key performance objectives.

Key to note was to enhance customer satisfaction by improving and increasing more houses for residents, ensuring county residents are happy with services rendered and operating better stocked clinics and hospitals. Introducing community policing and enforcing the law also enhanced security.

The study further indicated that there haven’t been fewer cases of fraud. The study showed that the quality of education in their technical and vocational training institutions had improved. Modigliani and Miller (2015) agree with the findings by arguing that the quality of education in the technical and vocational training institutions had improved as well as access to wholesome water to residents. The study, however, recommended that to improve the county’s performance, rural roads needed to be been upgraded and for decentralized framework of service provision to be effective then there was need to have sufficient fiscal resources collected from the counties and received from the central government.

The study also made it clear that counties had not been able to prosecute more people on fraud issues. The study further found that county residents were happy with their services. It was also revealed that rural roads had been upgraded (Every part of the county is accessible with good roads). This is similar to Klapper and Love (2014) who assert that balanced score card systems incorporates collective upgrading of the performance of an entity with focus on:- sustainability performance, business activities that are efficient, market and financial outcomes, customer value, organizational capacity and stakeholder satisfaction.

Moreover, counties access to wholesome water to residents was much better than 5 years ago. The study further found that they had constructed more houses for residents. Kiel (2011) who argues financial perspective and customer perspective the highest score which were as a

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result of reduced cases of fraud and corruption within the county and this was measured with the extent to which the county residents were happy with the services offered. Most of the counties were also able to provide county residents with additional services and that the counties are adopting technology to ensure effective service delivery.

This agrees with Owusu-Ansah (2015) who argues that in the Indian context, the issues on corporate governance and the influence it has on firms’ sustainable performance has not been well studied despite the many studies carried out. The workers as well as management work hand in hand to convert in an efficient manner inputs to outcomes so as to ensure that customer needs are met; capacity of the firm founded on; knowledge and skills, culture, tools and technology, physical infrastructure, delivery of services and customers as well as stakeholder’s participation.

The study revealed that county staff work well with each other and that county residents were engaging themselves more in an informed way. Study by Arregle (2014) inferred that organizations with good governance bring down agency risks bringing about shareowners' and banks’ eagerness to give capital at a lower cost to the organization. It is assumed that great governance produces financial specialist goodwill and certainty and inadequately represented firms are anticipated to be less gainful. Different specialists argued that great corporate governance is imperative for expanding financial specialist certainty and market liquidity. Similarly, the study found that they had adopted performance contracting for their employees to enhance worker productivity and reduce bureaucracy. This is in line with García and García (2015) who argued that empowering of honesty, upholding, imparting of controls, a feeling of good morals and the settling of conflicting circumstances are the benefits of stakeholders. Corporate governance works towards advancing effective assets in the company and the greater economy. It moreover strengthens to bring closer in little efforts speculated capital thorough improved financial professionals and creditor certainty nationally and globally. Corporate governance also improves the company’s awareness to the requirements of the people and also enhances long-term sustainable performance to the organization.

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It was also clear that counties had enhanced monitoring and evaluation. Monks and Minnow (2015) agreed with the finding by arguing that good governance leads to an expansive ability and a sound return for investors’. Also, good governance may add profits to a firm by better streaming in of assets and enhanced contact to less effort capital, solid inward controls, self- control which eventually leads to low debt finances.

The study also established that employee morale was high. This finding agreed with the finding by Dvorák (2015) arguing that profound and straightforward budgetary markets, vigorous lawful frameworks, and proficient asset portion uphold organizations that are legitimately administered. This therefore improves economic and public management soundness and creates universal development rates, while inadequately administered firms to the contrary.

The study found that county governments serve residents using innovative ways. Djankov and Hoekman (2014) argued that great corporate governance leads to advanced governance and sensible supply of the company’s assets, and improves performance, which would result to the share cost of the company, improving the estimation of the public interest and fulfillment.

The study established that the overall economy of most of the counties had grown. This finding was similar to study conducted by Fan and Lang (2012) on internal process perspective using balanced score-card (BSC) in county operations.

The study assessed level of employee morale, corporation within the county staff, level of technological adoption and employee performance contracting which was aimed at enhancing worker productivity and reducing bureaucracy. The study findings show that county residents were engaging more in an informed way about the county operations and the county had enhanced M&E.

The study also found that the time taken to complete projects such as roads had reduced significantly over time. This agrees with Padgett and Shabbir (2016) whose study on benchmarking of counties efficiency using BSC to evaluate learning and growth of firms

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against their performance. It can be used to; establish firms with processes leading to increased performance, expose areas where improvements are needed and assess performance objectively. Performance indicators from the study show that time taken to complete projects had reduced significantly over time, the institutions sampled had invested in new and better ways of doing things, they serve customers using innovative ways and the overall performance of the institution had grown.

The study indicated that most counties invest in creative ways to perform better. This is line with Glaeser, Johnson and Shleifer (2014) study where the view of testing whether counties’ efficiency was successful, he identified operating strengths of competitive advantage in the county government as: - county staff priding themselves with a culture of excellence, communication within the counties had improved, productivity had increased, teamwork in the counties had improved, the counties had increased revenue collection while residents had become more and more satisfied with the services offered. In addition, the study established that counties had information on what other county governments were doing better than themselves.

Gregory (2012) argued that county government stakeholders that assumed that great governance produces financial specialist goodwill; certainty and inadequately represented firms are anticipated to be less gainful.

It moreover strengthens to bring closer in little efforts speculated capital thorough improved financial professionals and creditor certainty nationally and globally and in turn improves efficiency and quality of services for the county and its dwellers.

The study found that workforce diversity was encouraged and that the counties analyze the internal environment before introducing any policy changes. Also, it was established that workers with disabilities had been absorbed into the county workforce and that the county has invested in maintaining the environment. These findings agree with Kocenda and Svejnar (2014) who argue that performance strategy can be realized if counties are accurately mapped onto the environment in which they operate. The strategy is based on conservation for the benefit of stakeholders, investing in the county environment, improvement, and

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reducing the number of complaints from stakeholders. The findings were moderated by operational policies, which were the practices and instruments by which counties rationalize and continuously improve the efficiency of services offered. These policies include decision structures, standards, team synergy, systems, procedures and methods that yield high performance and consistently respond to changing circumstances.

The study also found that counties had reduced the number of complaints from stakeholders. Most of counties in Kenya endeavor to conserve the environment for the benefit of stakeholders. The study found that counties analyzed the external environment before making any decisions.

These agreed with Gupta and Boyd (2015) who averred counties have been introduced in developing nations in Africa to ensure that development of the economy is brought closer to the citizens and to ensure they benefit from the government’s services. Counties also help the countries refrain from misuse of the power and resources by the national government. In countries where devolution has been successful, development has increased as compared to those that are yet to introduce county governments.

The study found that the county staff pride themselves with a culture of excellence where teamwork in the counties had improved. Similarly, the study revealed that communication within the counties had improved and productivity had increased as compared to three years ago. Further, the study showed that counties had increased revenue collection with residents becoming more satisfied with their services. Gordini (2012) agrees with the findings by arguing that in view of testing whether counties efficiency was successful, he identified operating strengths of competitive advantage in the county government as: - county staff priding themselves with a culture of excellence, communication within the counties had improved, productivity had increased, teamwork in the counties has improved, the counties had increased revenue collection while county residents had become more and more satisfied with the services offered. It was revealed that services provided by county governments are fully aligned. The study also found that the delivery of excellent quality services by the staff of county government in terms of citizens needs satisfaction. The delivery process of service

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to Kenyans is delivered on time by the county governments in comparison with the National government. These findings were in line with Kocenda and Svejnar (2014) who argued that performance strategy can be realized if counties are accurately mapped into the environment in which they operate where they are moderated by operational policies which were the practices and instruments by which counties rationalize and continuously improve the efficiency of services offered. These policies include decision structures, standards, team synergy, systems, procedures and methods that yield high performance and consistently respond to changing circumstances.

It was established that most counties stand out from the others across the country as a result of improved infrastructure and human settlement, reduced traffic, minimal corruption since there is transparency in public transactions, farming like fishing, mining, and trading like barter trade. This is in line with Megginson and Netter (2015) who in their study noted that good company supremacy performance improved as well as ensured outside capital access is enabled thus making economic development sustainable. This, therefore, indicts that corporate performance ought to be measured according to the level of satisfaction of all shareholders in a company.

The study also found that most counties are different from others as a result of transport and communication, extraction of oil and production of diesel and improved collection of taxes makes their counties stand out from other counties. This conforms to Kapopoulos and Lazaretou (2011) who on instruments company governance and valuation of the firm among listed firms in Malaysia found that the average basic markers used as a part of scholarly research and institutional rating administrations have extremely restricted capacity to clarify administrative conduct and organizational performance. Therefore, the findings suggested that a more extensive structure ought to consider every single stakeholder in the governance mosaic, including those in and out of the firm.

The study also revealed that different cultures, beliefs and backgrounds, improved health facilities, having factories that processes fruits and juice, creation of employment through devolution of county governments, center for education and tourism and tourism promotion through development of tourism sites makes many counties stand out from the rest.

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Further on ways of improving corporate governance in counties resulting in improved performance of the county government, the study found that having a segmented committee of corporate governance to handle issues, paying taxes and improving the collection, being loyal and straight forward in performing county government activities, improving transport and communication and introducing new job opportunities and training of youths.

The study also cited enhancing refrigeration services for fishermen, establishing policies to enhance growth, expansion and development of business and training of farmers on modern ways of farming as other ways of improving corporate governance in counties.

This finding concurs with Ross (2015) who argued that counties with good governance bring down agency risks brought about by shareowners’ and banks’ eagerness to give capital at a lower cost to the organization. It is assumed that great governance produces financial specialist goodwill and certainty, and inadequately represented firms are anticipated to be less gainful. Different specialists argued that great corporate governance is imperative for expanding financial specialist certainty and market liquidity.

The study also established that electing appropriate leaders, acquiring technological information from developed counties, protecting public resources and ensuring proper auditing of public funds, constructing more colleges and technical schools, development of wells and irrigation schemes to be used during dry season for livestock and farming activities, emphasizing integrity and ethical dealings and formation of effective executive and committee operations improving corporate governance in counties.

Further, they suggested other ways like defining the role and responsibilities of the county officials, evaluating the performance of the county officials and making principled compensation decisions, setting goals and objectives by putting target and recommending when they are supposed to be attained and offering of low interest rates to expand businesses. This was in line with Caplan (2014) study on influence of commercial domination rules on performance management in a developing marketplace as one of the variables by considering the case of Thailand. The study used 320 listed companies from year 2010 to 2015 with a great cross-section.

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They found that a standard deviation increment in the implicit rules appropriation file was identified with a 10% expansion in normal firm esteem while controlling for firm-particular elements and industry impacts. The connections were exceptionally critical and not present preceding the presentation of the set of accepted rules, recommending a causal connection from implicit rules appropriation to firm value.

5.4 Conclusion

5.4.1 Influence of Inclusiveness of Employees on Performance of County Governments

The study concluded that inclusiveness influences the performance of county governments in Kenya significantly and positively. This was attributed to the county governments’ adoption of capacity building programs directed at ensuring employees have the same goals, ensuring fair recruitment procedures and having county staff that have developed skills that make performance of their work easy. This significant influence could also be attributed to the fact that most counties have training structures that are enhanced to ensure participation of all stakeholders where employees are provided with the best place to work and are trained on technical skills and self-improvement so as to enhance productivity.

5.4.2 Functions of Regulatory Bodies on Performance of County Governments

The study also concluded that regulatory bodies positively and significantly influenced performance of the country’s county governments. The study deduced that regulations set by the Public Procurement Regulatory Authority regulate and shape the county’s procurement procedures and that most counties have checks and balances at all stages of public funds utilization. It was also deduced that most county governments have created effective communication procedures from the managing team to the members of the public and fair working conditions that favour investment and trade. The study also deduced that counties have performed well in fund management and regulatory bodies enhance market openness. The set regulations enhance networking with other like-minded counties so as to satisfy the public needs of most of the counties.

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5.4.3 Influence of Consensus Orientation Practices on Performance of County Governments The study further concluded that consensus orientation influenced performance of county governments in Kenya. This was as a result of county officials input playing a valuable role in implementation of the county’s strategic plan and the Governor communicating priorities to his/her subordinates. It was also as a result of counties being able to ensure that the public understand the county’s priorities, recognizing and protecting the rights of all residents and stakeholders and county’s workforce working together to promote increased commitment from all stakeholders. It was also as a result of the fact that county directors work in consultation with other stakeholders and ensure that funds use information is displayed publicly for all to access.

5.4.4 Influence of Stakeholders’ Participation on Performance of County Governments The study again concluded that stakeholder participation influences performance of county governments in Kenya positively. It was deduced that consultations on issues affecting project performance in the counties took place where members of the public are provided with a platform to exercise their oversight functions as well as encouraging investors’ participation in county development plans.

The study also deduced that County Governments ensure effective communication to ensure the public understands the counties’ next point of action where implementation of new projects required collective accountability involving all stakeholders. Innovative solutions are the result of stakeholder involvement to share in solving development challenges facing the county where county government ensures that both individuals and groups of people are given responsibilities to ensure the success of identified projects within the county.

5.4.5 Moderating Effect of Political Environment on Corporate Governance and Performance of County Governments The study finally concluded that political environment as a moderating variable influences county performance in the country positively. It was deduced that most governors have a good working relationship with the county assembly and that the county executives ensure

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that development is distributed equally throughout the county regardless of political pressures. The study also deduced that the county prioritizes developments based on public interest rather than political pressures and that trade associations are increased as a result of the county’s political activities.

5.5 Recommendations

5.5.1 Recommendations for Improvement

5.5.1.1 Influence of Inclusiveness of Employees on Performance of County Governments

It was revealed inclusiveness positively and significantly influences the county governments’ performance in Kenya. Therefore, the study recommends that county governments need to come up with effective inclusiveness strategies that will ensure that engagement of all the employees in their respective counties in making decisions on anything that concerns a county’s development. This will enhance performance by ensuring employees are able to address customer needs and complaints quickly and equally to all residents and that the employees are provided with the best place to work where they can develop skills that make performance of their work easy.

5.5.1.2 Functions of Regulatory Bodies on Performance of County Governments Since it was found that regulatory bodies have a positive and significant influence on county governments’ performance in Kenya, there is a need for county governments to set effective regulations through the Public Procurement Regulatory Authority so as to regulate and shape the county’s procurement procedures. This will ensure that no financial resources are unaccounted for. The county governments also need to create fair working conditions that favor investment and trade, which will enhance market openness and co-ordination between counties hence allowing and encouraging foreign investments.

5.5.1.3 Influence of Consensus Orientation Practices on Performance of County Governments

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The study found that consensus orientation affect the performance of county government significantly. The study also recommends complete implementation and enforcement of corporate governance guidelines in the counties at all times. The study also suggests a need for the county governments to organize regular business management skills training for the county officials and staff. This improves the level of expertise within the counties.

The study also recommends appropriate division of work between national and county governance bodies to eliminate uncalled for conflicts. This can be achieved by emphasizing meritocracy over political rightness in hiring of staff. The study also recommends that county financial administrators should strictly monitor financial dealings in the counties. Financial impropriety should be punished and stakeholders should be given the right to participate in the running of the affairs of the counties.

5.5.1.4 Influence of Stakeholders’ Participation on Performance of County Governments Further, the study found that stakeholder’s participation affects the affect the performance of county government significantly. Hence the study also recommends that county governors need to sensitize county directors to work in consultation with other stakeholders to ensure that all of them feel part of the development agenda for the county.

The county governments need to also ensure that the public understands the county’s priorities so as to reduce leadership conflicts that may derail progress. Further, counties need to be educated on how best to apply practices of corporate governance to improve their operational and financial performance. Good governance has a positive economic impact on their county government performance over time on a wide range of areas. This can be done through corporate governance forums and trainings for counties’ officers

5.5.1.5 Moderating Effect of Political Environment on Corporate Governance and Performance of County Governments

Lastly, the study revealed that political environment has a significant moderating effect on how corporate governance is related to performance of county government. Therefore, the

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county governments need to provide members of the public and political leaders with platforms to exercise their oversight roles. This includes being consulted on what projects need to be done within the county. This will make them feel part of the development projects and therefore give the needed support.

The county governments need to also encourage investors’ participation in county development plans and adopt effective communication to ensure the public understands the counties’ next point of action. The county officials, through the ward and village administrators, need to ensure that implementation and monitoring of county operations and projects is a collective responsibility that involves all stakeholders by ensuring that common Mwananchi is involved in the development projects decision making as well as implementation.

5.5.2 Recommendations for Further Research

The current study focused on how corporate governance affects county government’s performance in Kenya, but another study needs to be done to establish the influence of corporate governance on the national government performance. Another study or studies can also look at influence of corporate governance on CDF projects performance in Kenya. The researcher carried out the study on corporate governance practices and their implementation challenges in county governments.

Further studies on implementation of corporate governance practices in county governments can also be carried out in other countries as well, which will enable researchers to come up with concrete recommendations and conclusions on practiced corporate governance elements. In addition, the study should be expanded to include other sectors like the non- governmental organizations.

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APPENDICES

Appendix I: Introduction Letter

Dear Respondent,

RE: RESEARCH STUDY

This questionnaire is designed to gather information on the “CORPORATE GOVERNANCE AND PERFORMANCE OF COUNTY GOVERNMENTS IN KENYA”. The study is done as partial fulfillment for the award of Doctorate degree in Business Administration (DBA - Strategic Management) at the United States International University – Africa.

The information gathered in this study will be treated with strict confidence and in no instance will your name be mentioned in this research. The information will not be used for any other purpose other than for this academic exercise.

Your assistance in facilitating the same will be highly appreciated.

Thank you in advance

Yours sincerely

………………………………

Machel Waikenda

648969

DBA/ Business Administration (Strategic Management)

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Appendix II: Questionnaire

To provide your opinions on various questions, please tick (Ö ) the box that matches your views in the spaces provided.

Part A: DEMOGRAPHY I NFORMATION 1. Gender

Male [ ] Female [ ]

2. County……………………………………………………………...

3. Position ……………………………………………………………

4. Age

Below 20 years [ ] 21-25 years [ ] 26- 30 years [ ]

30-35 years [ ] 36- 40 years [ ] 40- 50 years [ ]

Above 50 years [ ]

5. Level of education

Primary [ ] Secondary [ ] College [ ]

University [ ] Other specify …………………………

6. No of years worked with the county

Below 12 months [ ] 1-5 years [ ] 6-10 years [ ]

10-15 years [ ] above 15 years [ ]

7. Number of tribes in the county

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One ethic group dominates over 80% [ ] The county is cosmopolitan [ ] The county comprises of 50% from one ethnic group and the rest is a combination of others [ ] Other kindly specify …………………………… 8. Party affiliation of the county

Ruling party [ ]

Opposition party [ ]

Other [ ]

Part B: INCLUSIVENESS

Provide your views on the following parameters:

Parameter

No Extent Low Extent Moderate Extent Great Extent Very Great

1. Our employees are able to address customer needs and complaints quickly and equally to all residents

2. Employees are provided with the best place to work

3. County staff have developed skills that make performance of their work easy

4. The county ensures fair recruitment procedures

5. Our training structure is enhanced to ensure participation of all stakeholders

6. We have adopted capacity building programs directed at ensuring employees have the same goals

242

7. We train our employees on technical skills and self- improvement so as to enhance productivity

8. We regularly review our employee welfare to incorporate cultural diversity

9. We ensure gender balance to promote equality

Part C: REGULATORY BODIES

Provide your views on the following parameters:

Parameter

No Extent Low Extent Moderate Extent Great Extent Very Great

1. The county has performed well in fund management compared to other counties

2. We have checks and balances at all stages of public funds utilization

3. We have created effective communication procedures from the managing team to the members of the public

4. We have created fair working conditions that favor investment and trade

5. Regulations set by the Public Procurement Regulatory Authority regulate and shape the county’s procurement procedures

6. Regulatory conditions are set to motivate co-ordination with other counties

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7. The set regulations enhance networking with other like- minded counties so as to satisfy the public needs of our county

8. Market openness is enhanced by our regulatory bodies

9. Regulatory bodies create a risk in managing the county

Part D: CONSENSUS ORIENTATION

Provide your views on the following parameters:

Parameter

No Extent Low Extent Moderate Extent Great Extent Very Great 1. The county recognizes and protects the rights of all residents and stakeholders

2. Funds use information is displayed publicly for all to access

3. The county government management through the pp County Executive Committee (CEC) has resulted in fair and equitable funds-use resulting to a decrease in the risk of fraudulent exercises

4. County directors work in consultation with other stakeholders

5. County workforce work together to promote increased commitment from all stakeholders

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6. Our governor communicates what he feels should be prioritized to his/her subordinates

7. My input plays a valuable role the implementation of the county strategic plan

8. As a county, we have realized that high involvement at all work levels lead to greater individual efficiency thus, greater overall performance

9. Managers involve non-supervisory level employees through practices that offer a better understanding of the county performance mission

10. We ensure that the public understand the county’s priorities

Part E: STAKEHOLDER’S PARTICIPATION

Provide your views on the following parameters:

Parameter

No Extent Low Extent Moderate Extent Great Extent Very Great 1. Members of the public are provided with a platform to exercise their oversight functions

2. Innovative solutions are as a result of stakeholder involvement to share in solving development challenges facing the county

3. Members of the public take part in budgeting

4. Civic education units have been established for educating citizens on their rights in county development

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5. The county encourages investors participation in county development plans

6. The County Government ensures effective communication to ensure the public understands the counties’ next point of action

7. There are consultations on issues affecting project performance in the county

8. Implementation of new projects is a collective responsibility that involves all stakeholders

9. The county government ensures that both individuals and groups of people are given responsibilities to ensure the success of identified projects within the county

10. Monitoring of county operations is a collective responsibility that involves all stakeholders

Part F: POLITICAL ENVIRONMENT

Provide your views on the following parameters:

Parameter

No Extent Low Extent Moderate Extent Great Extent Very Great 1. The political setting influences control of revenue to their preferred areas

2. The political setting influences planning and development in the county

3. The political setting leads to a mismanagement of finances in the county leading to a decrease in investors and

246

investment

4. Trade associations are increased as a result of the county’s political activities

5. We ensure professional associations with other counties despite our political attachment

6. Our county’s legislative bodies are neutral and ensure awareness raising is done to attract investors

7. Our county executives ensure that development is distributed equally throughout the county regardless of political pressures

8. The county’s political affiliation with the National government influences budget authorization

9. The county prioritizes developments based on public interest rather than political pressures

10. The governor has a good working relationship with the county assembly

Part G: PERFORMANCE

Provide your views on the following parameters:

Parameter

No Extent Low Extent Moderate Extent Great Extent Very Great Financial 1. We have had a distinct increase in revenue perspective collection that is higher than the inflation rate

247

2. There have been fewer cases of fraud

3. We have been able to prosecute more people on fraud issues

4. There is value for money in every project the county has undertaken.

5. Payments to county suppliers and contractors is done fast with few delays

6. Revenue loss loopholes have been sealed

Customer 7. We have constructed more houses for perspective residents

8. County residents are happy with our services

9. We are operating more well stocked clinics and hospitals

10. Law enforcement and security is ensured by introducing community policing

11. The quality of education in our technical and vocational training institutions has improved

12. Access to wholesome water to residents is

248

much better than 5 years ago

13. Rural roads have been upgraded (Every part of the county is accessible with good roads)

Internal 14. Employee morale is high process perspective 15. County staff work well with each other

16. We are able to provide county residents with additional services

17. The county is adopting technology to ensure effective service delivery

18. We have adopted performance contracting for our employees to enhance worker productivity and reduce bureaucracy

19. We have enhanced monitoring and evaluation

20. County residents are engaging themselves more in an informed way

Learning 21. The county invests in new and better ways of and growth doing things

22. We serve residents using innovative ways

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23. The overall economy of the county has grown

24. The time taken to complete projects such as roads has reduced significantly over time

25. We have information on what other county governments are doing better than ourselves

Social 26. Workforce diversity is encouraged

27. Workers with disabilities have been absorbed into the county workforce

28. The County analyzes the internal environment before introducing any policy changes

Environmen 29. The County analyzes the external t environment before making any decisions

30. We endeavor to conserve our environment for the benefit of stakeholders

31. We have reduced the number of complaints from stakeholders

32. The county has invested in maintaining the environment

250

Competitive 33. County staff pride themselves with a culture Advantage of excellence

34. Communication within the county has improved

35. Productivity has increased as compared to three years ago

36. Teamwork in the county has improved

37. The county has increased revenue collection

38. County residents are becoming more and more satisfied with our services

39. Please indicate whether county government are aligning citizens’ needs and preferences with the provided services?

Fully aligned [ ] Fairly aligned [ ]

Not sure [ ] To some extent [ ]

Not aligned at all [ ]

251

40. Please indicate how you rate the services delivery quality by the county government staff in terms of citizen’s needs satisfaction?

Excellent [ ] Good quality [ ]Average [ ] Poor [ ]Very poor [ ]

41. Please indicate how service delivery process to Kenyans by the National government compare county government in respect to delivery time?

Delivery of Services is done on time [ ]

Delivery time has slightly improved [ ]

The status quo has remained [ ]

Service delivery time has become slower [ ]

No change in speed of delivery [ ]

42. What do you believe makes your county stand out from the other 47 across the country? ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… …………………………………………………………………………………………

252

43. Suggest ways of improving corporate governance in your county that will result in improved county government performance? ………………………………………………………………………………………………… ………………………………………………………………………………………………… …………………………………………………………………………………………………

………………………………………………………………………………………………… ………………………………………………………………………………………………… …………………………………………………………………………………………………

THANK YOU FOR YOUR TIME AND PARTICIPATION

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Appendix III: County Performance in Kenya

RANK GOVERNOR COUNTY GOVERNOR’S APPROVAL RATING sample= 600 PER COUNTY 1 ALFRED MUTUA MACHAKOS 79.4%

2 KENNETH LUSAKA BUNGOMA 77.6% 3 JOSPHAT NANOK TURKANA 73.9% 4 SIMON KACHAPIN WEST POKOT 72.5% 5 MOSES AKARANGA VIHIGA 71.9% 6 SALIM MVURYA KWALE 71.7% 7 WYCLIFFE OPARANYA KAKAMEGA 71.3% 8 JAMES ONGWAE KISII 70.1% 9 MWANGI WA IRIA MURANG’A 69.6% 10 ISAAC RUTO BOMET 68.3% 11 ALI HASSAN JOHO MOMBASA 67.1% 12 ALEX TOLGOS ELGEYO MARAKWET 65.4% 13 NATHIF JAMA ADAM GARISSA 64.9% 14 SAMWEL KUNTAI NAROK 64.8% 15 JOHNSON MTUTA MRUTTU TAITA TAVETA 64.8% 16 JACKSON MANDAGO UASIN GISHU 64.7% 17 PETER MUNYA MERU 64.5% 18 MOSES KISAINE SAMBURU 64.4% 19 SOSPETER OJAAMONG BUSIA 63.7% 20 ZACHARY OBADO MIGORI 63.6% 21 CYPRIAN AWITI HOMABAY 62.7% 22 LAGAT CLEOPHAS NANDI 61.1% 23 CORNEL AMOTH RASANGA SIAYA 61.0% 24 KIVUTHA KIBWANA MAKUENI 60.8% 25 AMASON JEFFA KINGI KILIFI 60.2% 26 PAUL KIPRONO CHEPKWONY KERICHO 59.2% 27 KINUTHIA MBUGUA NAKURU 58.6% 28 JULIUS MALOMBE KITUI 58.5% 29 ALI ROBA MANDERA COUNTY 58.4% 30 SAMWEL MBAE THARAKA NITHI 58.2% 31 PATRICK SIMIYU TRANS NZOIA 57.7% 32 JACK RANGUMA KISUMU 57.4% 33 AHMED ABDULLAHI WAJIR 57.3% 34 DAVID NKENDIENYE KAJIADO 57.1% 35 ISSA TIMAMY LAMU 57.1% 36 NDATHI JOSEPH KIRINYAGA 57.1% 37 CHEBOI CHESIRE BARINGO 56.5% 38 DANIEL WAITHAKA NYANDARUA 56.4% 39 NDERITU GACHAGWA NYERI 55.8% 40 NYAGA WAMBORA EMBU 55.5% 41 JOHN NYANGARAMA NYAMIRA 54.6% 42 EVANS KIDERO NAIROBI 53.9% 43 UKUR YATANI MARSABIT 53.2% 44 JOSHUA W. IRUNGU LAIKIPIA 52.2% 45 GODANA DOYO ISIOLO 51.1% 46 HUSSEIN DADO TANA RIVER 49.0% 47 WILLIAM KABOGO KIAMBU 48.0% AVERAGE INDEX 61.8% Source: Auditor General Report (2016)

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Appendix IV: Kenyan Map with all Counties

Source: Kenya National Bureau of Statistics (2016)

255

Appendix VII: Normality Tests

256

257

258

Appendix VIII: USIU Letter

259

Appendix IX: NACOSTI Letter

260

Appendix X: NACOSTI Certificate

261

Appendix XI: Factor Analysis Results

Communalities

Initial Extraction Our employees are able to address customer needs and complaints 1.000 .941 quickly and equally to all residents Employees are provided with the best place to work 1.000 .970 County staff have developed skills that make performance of their 1.000 .956 work easy The county ensures fair recruitment procedures 1.000 .983 Our training structure is enhanced to ensure participation of all 1.000 .935 stakeholders We have adopted capacity building programs directed at ensuring 1.000 .922 employees have the same goals We train our employees on technical and self-improvement so as to 1.000 .909 enhance productivity We regularly review our employee welfare to incorporate cultural 1.000 .942 diversity We ensure gender balance to promote equality 1.000 .928 The county has performed well in fund management compared to 1.000 .919 other counties We have checks and balances at all stages of public funds utilization 1.000 .951 We have created effective communication procedures from the 1.000 .928 managing team to the members of the public We have created fair working conditions that favor investment and 1.000 .951 trade Regulations set by the Public Procurement Regulatory Authority 1.000 .866 regulate and shape the county’s procurement procedures Regulatory conditions are set to motivate co-ordination with other 1.000 .844 counties The set regulations enhance networking with other like-minded 1.000 .872 counties so as to satisfy the public needs of our county Market openness is enhanced by our regulatory bodies 1.000 .886 Regulatory bodies create a risk in managing the county 1.000 .963 The county recognizes and protects the rights of all residents and 1.000 .934 stakeholders Funds use information is displayed publicly for all to access 1.000 .975 The county management through the County Executive Committee (CEC) has resulted in fair and equitable funds-use resulting to a 1.000 .969 decrease in the risk of fraudulent exercises County directors work in consultation with other stakeholders 1.000 .983 County workforce work together to promote increased commitment 1.000 .967 from all stakeholders

262

Our governor communicates what he feels should be prioritized to 1.000 .948 his/her subordinates My input plays a valuable role the implementation of the county 1.000 .984 strategic plan As a county, we have realized that high involvement at all work levels 1.000 .961 lead to greater individual efficiency thus, greater overall performance Managers involve non-supervisory level employees through practices 1.000 .962 that offer a better understanding of the county performance mission We ensure that the public understand the county’s priorities 1.000 .988 Members of the public are provided with a platform to exercise their 1.000 .962 oversight functions Innovative solutions are as a result of stakeholder involvement to 1.000 .967 share in solving development challenges facing the county Members of the public take part in budgeting 1.000 .549 Civic education units have been established for educating citizens on 1.000 .984 their rights in county development The county encourages investors participation in county development 1.000 .641 plans The County Government ensures effective communication to ensure 1.000 .962 the public understands the counties next point of action There are consultations on issues affecting project performance in the 1.000 .988 county Implementation of new projects is a collective responsibility that 1.000 .952 involves all stakeholders We ensure that both individuals and groups of people are given responsibilities to ensure the success of identified projects within the 1.000 .801 county Monitoring of county operations is a collective responsibility that 1.000 .968 involves all stakeholders The political setting influences control of revenue to their preferred 1.000 .897 areas The political setting influences planning and development in the 1.000 .841 county The political setting leads to a mismanagement of finances in the 1.000 .882 county leading to a decrease in investors and investment Trade associations are increased as a result of the county’s political 1.000 .819 activities We ensure professional associations with other counties despite our 1.000 .967 political attachment Our county’s legislative bodies are neutral and ensure awareness 1.000 .897 raising is done to attract investors Our county executives ensure that development is distributed equally 1.000 .984 throughout the county regardless of political pressures The county’s political affiliation with the National government 1.000 .961 influences budget authorization

263

The county prioritized developments based on public interest rather 1.000 .893 than political pressures Extraction Method: Principal Component Analysis.

Component Matrixa

Component 1 2 3 4 5 6 7 Our employees are able to address customer needs and complaints quickly and .182 .604 .075 .685 .257 .005 .048 equally to all residents Employees are provided with the best place .954 .126 .100 .031 .142 .101 .048 to work County staff have developed skills that .959 .123 .031 .059 .045 .028 .122 make performance of their work easy The county ensures fair recruitment .001 .699 .602 .315 .099 .152 .022 procedures Our training structure is enhanced to .830 .289 .187 .119 .017 .225 .250 ensure participation of all stakeholders We have adopted capacity building programs directed at ensuring employees .714 .156 .470 .014 .235 .308 .128 have the same goals We train our employees on technical and self-improvement so as to enhance .932 .064 .158 .089 .051 .019 .010 productivity We regularly review our employee welfare .947 .026 .108 .022 .175 .018 .031 to incorporate cultural diversity We ensure gender balance to promote .901 .266 .172 .094 .066 .016 .043 equality The county has performed well in fund .193 .105 .672 .267 .333 .260 .411 management compared to other counties We have checks and balances at all stages .930 .109 .005 .016 .194 .185 .053 of public funds utilization

264

We have created effective communication procedures from the managing team to the .149 .525 .400 .181 .042 .028 .689 members of the public We have created fair working conditions .088 .620 .665 .310 .017 .113 .085 that favor investment and trade Regulations set by the Public Procurement Regulatory Authority regulate and shape .838 .118 .010 .016 .291 .243 .071 the county’s procurement procedures Regulatory conditions are set to motivate .252 .062 .126 .270 .033 .782 .134 coordination with other counties The set regulations enhance networking with other likeminded counties so as to .309 .535 .218 .097 .237 .529 .311 satisfy the public needs of our county Market openness is enhanced by our .805 .289 .032 .187 .332 .045 .080 regulatory bodies Regulatory bodies create a risk in .940 .195 .020 .047 .121 .103 .113 managing the county The county recognizes and protects the .017 .655 .274 .588 .170 .151 .180 rights of all residents and stakeholders Funds use information is displayed .949 .035 .067 .034 .139 .212 .058 publicly for all to access The county management through the County Executive Committee (CEC) has resulted in fair and equitable funds-use .278 .091 .050 .028 .620 .029 .001 resulting to a decrease in the risk of fraudulent exercises County directors work in consultation with .001 .699 .602 .315 .099 .152 .022 other stakeholders County workforce work together to promote increased commitment from all .726 .584 .290 .055 .010 .107 .024 stakeholders Our governor communicates what he feels should be prioritized to his/her .288 .489 .075 .744 .178 .086 .149 subordinates My input plays a valuable role the .922 .068 .191 .001 .274 .124 .050 implementation of the county strategic plan

265

As a county, we have realized that high involvement at all work levels lead to .951 .067 .170 .019 .060 .137 .036 greater individual efficiency thus, greater overall performance Managers involve nonsupervisory level employees through practices that offer a .917 .273 .151 .054 .098 .065 .089 better understanding of the county performance mission We ensure that the public understand the .923 .172 .194 .004 .250 .056 .061 county’s priorities Members of the public are provided with a platform to exercise their oversight .922 .111 .008 .176 .091 .149 .196 functions Innovative solutions are as a result of stakeholder involvement to share in solving .726 .584 .290 .055 .010 .107 .024 development challenges facing the county Members of the public take part in .195 .186 .157 .514 .094 .322 .275 budgeting Civic education units have been established for educating citizens on their rights in .922 .068 .191 .001 .274 .124 .050 county development The county encourages investors .056 .404 .266 .422 .011 .353 .319 participation in county development plans The County Government ensures effective communication to ensure the public .917 .273 .151 .054 .098 .065 .089 understands the counties next point of action There are consultations on issues affecting .923 .172 .194 .004 .250 .056 .061 project performance in the county Implementation of new projects is a collective responsibility that involves all .938 .183 .072 .004 .120 .114 .076 stakeholders We ensure that both individuals and groups of people are given responsibilities to .412 .027 .586 .194 .069 .486 .090 ensure the success of identified projects within the county Monitoring of county operations is a collective responsibility that involves all .864 .426 .179 .060 .043 .010 .047 stakeholders

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The political setting influences control of .150 .477 .163 .214 .495 .178 .546 revenue to their preferred areas The political setting influences planning .582 .002 .453 .051 .510 .185 .021 and development in the county The political setting leads to a mismanagement of finances in the county .267 .592 .501 .239 .347 .056 .167 leading to a decrease in investors and investment Trade associations are increased as a result .157 .862 .050 .167 .052 .132 .013 of the county’s political activities We ensure professional associations with other counties despite our political .726 .584 .290 .055 .010 .107 .024 attachment Our county’s legislative bodies are neutral and ensure awareness raising is done to .162 .496 .546 .405 .251 .079 .308 attract investors Our county executives ensure that development is distributed equally .922 .068 .191 .001 .274 .124 .050 throughout the county regardless of political pressures The county’s political affiliation with the National government influences budget .951 .067 .170 .019 .060 .137 .036 authorization The county prioritized developments based on public interest rather than political .141 .489 .239 .502 .190 .108 .015 pressures Extraction Method: Principal Component Analysis. a. 7 components extracted.

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