Effect of Corporate Governance on the Determinants of Financial Sustainability of Community Conservancies in Northern Kenya

Abstract

Financial sustainability is critical to the survival and growth of organizations all around the world. Community conservancies in Kenya struggle to survive and grow financially. The main objective of the study was to investigate the effect of corporate governance on the determinants of financial sustainability of community conservancies in northern Kenya. The research was led by the following specific objectives: to determine the impact of management competency, staff capacity, community participation, and revenue diversification on community conservancies' financial sustainability. Furthermore, it was determined whether corporate governance has a moderating effect on the relationship between determinants and the financial viability of community conservancies. The resource dependency theory, agency theory, and dynamic capacities theory served as the study's pillars. An explanatory research design was used. The target respondents comprised of 199 respondents from 31 community conservancies in Northern Kenya. A census of the 199 respondents was conducted. A questionnaire that was semi-structured was used to gather primary data. To evaluate the instrument's reliability and validity, pilot testing was done. The findings indicated that jointly and when combined, management competency, staff capacity, community participation, and revenue diversification had a favorable and substantial influence on community conservancies’ financial sustainability. Revenue diversification best explains financial sustainability, followed by management competence, followed by community participation, and lastly staff capacity. The R square increased from 63.3% to 66.6% when the R square with moderation was compared to the R square without moderation, indicating that corporate governance generally had a favorable moderating impact on the connection between the determinants and community conservancies’ financial sustainability. The study concluded that management competency, staff capacity, community participation, and revenue diversification positively contribute to enhanced financial sustainability. The research recommended that community conservancies management should ensure proper delegation of duties aimed at empowering employees. The staff should go through proper induction on what is required in their job. There should be regular training of staff in line with emerging trends. There should be timely and effective knowledge sharing between management and staff. The community should be involved in the decision-making process. The number of community members working in the conservancies should be increased. There is a need to identify and adopt alternative revenue sources such as membership fees, dividends from shares, and stocks and assets. Board meetings should be held regularly to deliberate on the current state and emerging matters. Board structure should be properly stipulated and roles for each member clearly outlined. Board membership should facilitate efficiency, especially on matters of decision making and there should be sub-committees with clear roles. Future studies could focus on determinants of financial sustainability in other sectors such as agriculture, health among others. Future research could also take into account additional variables that affect financial sustainability. Additionally, future studies could focus on other moderating variables such as government regulations, organization size, and age. In the subject of finance, the research significantly advances theory, policy, and practice.