Thesis:

Corporate governance and financial performance of commercial and service firms listed at the Nairobi security exchange

Commercial and service firms play a crucial role in modern economies, and their significance can be recognized in multiple ways. Enterprises play a pivotal role in both society and the economy by providing goods and services, creating job opportunities, and fostering economic growth and development. Commercial and service organizations have encountered many problems during their operations over time. Corporate governance has greatly improved industry firms' financial performance. This study examines how corporate governance affects NSE-listed commercial and service companies' financial performance. The present study examined how independent board, external audit quality, board size, and institutional ownership affect businesses' financial performance. The study was anchored on agency, steward and stakeholder theories. Data was collected from secondary sources, such as company papers and financial reports for the period 2018 to 2022, for the study. This study targeted the twelve NSE-listed commercial and service companies. Diagnostic testing preceded multiple regression analysis of the obtained data. The research followed ethical principles and receive consent from the appropriate regulating organization. Disclosed by the study, board independence significant affect these listed firms’ financial performance positively thus reaching the conclusion that businesses that have a larger percentage of independent board members are more likely to experience improved profitability and overall performance. External audit quality unveiled a favorable but irrelevant effect on these listed firms’ financial performance thus concluding that although higher quality audits might aid in enhancing financial performance, their influence is not substantial enough to be considered significant. Board size disclosed a noteworthy inverse effect on these listed firms’ financial performance reaching a conclusion that larger boards may hinder effective decision-making and governance, leading to poorer financial outcomes. Furthermore, the outcome uncovered that institutional ownership inversely affects listed commercial and service firms’ financial performance in Kenya prompting the conclusion that the presence of institutional investors does not play a crucial part in influencing the financial outcomes of these businesses. The study recommends that the Nairobi Securities Exchange regulatory bodies should establish guidelines that promote a higher proportion of independent directors on corporate boards. This could involve setting a minimum threshold for independent board members to ensure that firms benefit from diverse perspectives and objective oversight. By increasing the presence of independent directors, companies can enhance governance practices, leading to improved decision-making and strategic direction. The potential users of the study outcomes include capital market authority, investors, corporate managers and board members, academicians and the general public.