Compliance Risk Management and Financial Performance of Commercial Government-Owned Entities in Kenya
DOI:
https://doi.org/10.47941/ijf.3966Keywords:
Compliance risk management, Regulatory compliance, Internal control systems, Financial performance, Net Operating Surplus Ratio, Government-owned entities, KenyaAbstract
Purpose: Commercial Government-Owned Entities (GOEs) in Kenya are expected to generate revenue, support economic development and use public resources efficiently, yet about 60 per cent continue to record weak financial results. This study examined the influence of compliance risk management on their financial performance through regulatory compliance, compliance monitoring, internal control systems and compliance training.
Methodology: The study adopted a positivist philosophy and descriptive correlational design. A census targeted 102 finance and risk or compliance managers in 51 commercial GOEs; 91 questionnaires were returned and 46 complete entity-level pairs were analyzed. Primary questionnaire data were combined with audited financial statements for 2021 to 2025, using the composite Net Operating Surplus Ratio as the performance measure. Descriptive statistics, Pearson correlation and multiple regression were applied in SPSS version 27.
Findings: The model was significant (R² = 0.549, F = 9.594, p < 0.001). Internal control systems (β = 0.394, p = 0.004) and regulatory compliance (β = 0.317, p = 0.014) were significant, while monitoring and training were not. The study concluded that structural compliance controls are the principal compliance-related drivers of financial performance.
Unique Contribution to Theory, Policy and Practice: The study recommended that the National Treasury and the State Corporations Advisory Committee should develop a composite compliance risk management index weighted to the financial materiality of the four dimensions and use it to guide oversight and the conditions attaching to exchequer support.
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