Partial fulfillment for award of Master of Business Administration

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The application of corporate governance in capital markets intermediaries’ firms is aimed at ensuring stability and profitability of these firms. Stockbrokers in particular are expected to operate on the pillars of honesty, prudence and integrity and therefore the need to apply corporate governance mechanisms. The Capital Markets Authority (CMA) is the only body mandated to regulate Stockbrokers in Kenya. In order to strengthen governance and safeguard public interests in the capital markets industry, the CMA introduced the CMA 2011 guidelines on corporate governance. The rationale of this study was to investigate the corporate governance mechanisms and determine their effects on firm performance among the Kenyan stockbrokerage firms. The specific objectives of the study were to establish the corporate governance mechanisms and practices relevant to the Kenyan stockbrokerage firms, to determine whether there is a relationship between corporate governance mechanisms and firm performance, identify the challenges in implementing the corporate governance mechanisms and to assess the extent of implementation of the CMA regulation on Corporate Governance. The research design was exploratory and quantitative methods were used. The target populations were all the nineteen stockbrokerage firms listed and licensed in Kenya by the CMA and the main instrument was the questionnaire. Descriptive tables for mean, standard deviation, kurtosis and frequencies were then drawn and linear regression used to determine the relationship between the corporate governance mechanisms and firm performance (turnover). The forecasting model for performance of Kenyan stockbrokerage firms, was moderately significant with R2 of 48.3%. The study concluded that the board and the audit committees are instrumental in managing the businesses in a professional manner. The study concluded that the extent of the implementation was mainly driven by regulatory requirement to comply with the guidelines as opposed to business objective. It is recommended that future studies include other dependent variables such as return on investments, net profit, shareholders value, quality of products/service, market share and customer satisfaction.

English