ABSTRACT

Most SOEs are faced with a challenge of poor financial management as reflected in misuse of financial resources and inefficiencies in internal control systems. At the same time, most state-owned enterprises (SOEs) have consistently been making losses and some of the reasons cited are lack of sound financial management, poor reporting and tracking systems, lack of internal control systems and audit teams. These challenges result into the need of determining the interaction between financial management and performance. The main objective of this study was to assess financial management and performance of Commercial State-Owned Enterprises in Kenya. Specifically, the study sought to determine how internal control system, budgeting, financial reporting and tracking and risk management influence performance of SOEs. At the same time, the study sought to determine the moderating effect of organizational culture in the link between financial management and performance. The study was anchored on three theories including contingency, risk and resource-based theory, the empirical literature covers the five independent variables and the dependent one and the conceptual framework draws a picture of the variables and measuring indicators and the linkage of the variables. The type of design employed was descriptive in nature. The population of the study comprised of 29 Commercial State-Owned Enterprises and the respondents were 111 finance directors from these firms. Census sampling was adopted where all the 111 finance directors formed the study sample. For collection of data, questionnaires were used. The analysis of the collected data was done descriptively and inferentially. To present findings, tables and figures were used. From inferential statistics, internal control, budgeting, financial reporting and tracking, risk management and organizational culture all statistically influence how SOEs perform financially. The study concludes that internal control, budgeting, and financial reporting and tracking, risk management and organizational culture all have statistical and significant influence on the ability of SOEs to perform financially. The study recommends that the Chief Executive Officers of State-owned enterprises should initiate policy guidelines in regard to corporate governance and ensure that their full implementation with regular feedback. The finance managers of state-owned enterprises should closely work with budgeting committee to ensure that proper budget is put in place for improved performance of the organizations. The accountants of state-owned enterprises should ensure that regular financial reports are prepared in line with International Financial Reporting Standards. Risk managers of all state-owned enterprises should regularly assess and advice the management on inherent risks that are likely to affect financial performance. The management of stateowned enterprises should improve on the norms and beliefs of employees through increased team work, performance appraisal and reward systems.