Empirical Essays on Corporate Governance Code Compliance and Firms' Outcomes: An Analysis of State-Owned Enterprises in Kenya

Mchembere, David Juma (2026) Empirical Essays on Corporate Governance Code Compliance and Firms' Outcomes: An Analysis of State-Owned Enterprises in Kenya. Doctoral thesis, University of East Anglia.

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Abstract

Corporate governance in State-Owned Enterprises has remained a contemporary issue over the past decade, primarily due to rising incidents of occupational fraud, financial distress risk and persistent financial underperformance. These challenges have collectively impaired inclusive development within African continent. Despite this, policy and academic responses have been relatively limited. It is argued that the scarcity of research in this area stems from the unavailability of data. This research, therefore, seeks to address this gap by leveraging unique hand-collected data of SOEs in Kenya, a somewhat overlooked institutional setting. Therefore, this thesis investigates the nexus between corporate governance code compliance directives and firm performance, using three essays, as shown below.

The first essay addresses a pivotal, neglected policy question: whether gender diversity on audit committees (ACs) influences the likelihood of occupational fraud. Using unique hand collected data on SOEs between 2016 and 2022, the results reveal that, after accounting for endogeneity, only a higher presence and a critical mass of at least 33 per cent of women on ACs reduce the likelihood of occupational fraud. However, beyond 70 per cent representation, their marginal effects on occupational fraud become insignificant. Thus, this study advocates for gender diversity on ACs rather than overrepresentation.

The second essay examines whether adherence to corporate governance code directives under the ‘comply or explain’ framework affects the risk of financial distress. Drawing on the Mwongozo Corporate Governance Code (2015) directives, the study constructs composite compliance index scores for overall compliance with the code (CGCCDIScore) and for board governance directives (BGCDIScore) as proxies for adherence. Thus, the study investigates the association between overall compliance with the corporate governance code directives and the risk of financial distress, as evaluated using Eidelman's (1995) prediction model. Given that the board of directors is considered a primary internal corporate governance mechanism, this i thesis further investigates the relationship between overall compliance with board governance directives and the risk of financial distress.

Using a unique hand-collected dataset of SOEs between 2016 and 2022, the results show that higher adherence to overall corporate governance and board governance directives reduce the risk of financial distress.

The third essay investigates an important question regarding whether compliance with the corporate governance code directives enhances financial performance (Return on Assets). As in Essay Two, the overall corporate governance code and board governance directives were used as proxies for compliance, respectively. Using a unique hand-collected dataset of SOEs from 2016 to 2022, the results indicate that higher adherence to overall corporate governance and board governance directives is linked to better financial performance.

These empirical findings align with agency theory, resource dependency, critical mass theory, legitimacy theory, signalling theory, and neo-institutional theory. Overall, this study contributes to the corporate governance literature and policy reforms, particularly regarding the UN SDGs 5, 8, and 16; African Aspirations 3 and 6 of Agenda 2063; and the UN Principles of Responsible Investment.

Item Type:	Thesis (Doctoral)
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
Depositing User:	Bethany Turner
Date Deposited:	02 Sep 2026 10:13
Last Modified:	02 Sep 2026 10:13
URI:	https://ueaeprints.uea.ac.uk/id/eprint/104387
DOI:

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