Impact of corporate governance practices on firm’s performance a case on Zimbabwe Electricity Distribution Company-Southern Region.

Abstract

The main research topic for the study was to establish impact of corporate governance practices on firm’s performance - a case of Zimbabwe Electricity Transmission and Distribution Company. The main research objectives for the study was to determine the impact of corporate governance practices on firm performance. The sub-objectives were as follows; to identify the benefits of effective board size in firm performance at ZETDC, to establish the fundamental drivers of sound board independence in firm performance at ZETDC and to examine the effectiveness of CEO duality on firm performance at ZETDC. The research methodology which was used for the study was a case study. This research used the pragmatic paradigm as the research philosophy. The mixed method was used as the research design. The sample size for the study were 100 respondents. The research instruments for the study were a questionnaire and an in-depth interview. The main research finding for the study were that; the advantage of larger board size is the greater collective information that the board subsequently possesses and hence larger boards will lead to higher performance. The board requires the combination of executive and non-executive directors to pursue the shareholders’ interest. Independent directors could contribute their independent views and actively participate in board discussion. Independent chairman is believed to effectively and efficiently monitor and control CEO and other management activities to maximize the shareholders’ wealth. The chairman and CEO should be separated, as this has the potential to increase the effectiveness of board monitoring. The major recommendations were that, the roles of the chairman and the CEO should be separated, as this has the potential to increase the effectiveness of board monitoring CEO duality has negative and significant impacts on operating performance of when independent directors account for a small proportion of a board's membership. Developing and setting a clear strategy and then implementing it effectively are vital to ZETDC’s success. ZETDC ought to take steps to increase the quality of their corporate governance systems in order to improve the functioning of the business; promoting sound corporate governance to reduces risk of failure by firms to achieve set targets as well as good corporate governance fosters a culture of integrity and leads to a positive performing and sustainable business among others. ZETDC is obliged to reviewing the board composition on a regular basis to identify any shortcomings and make timely improvements. The researcher proposes further studies on a comprehensive theory explaining the complexity of boards and their characteristics in relationship to firm performance.