A Comparative Analysis of the effects of Corporate Governance on Financial Performance of Private and Public Owned Companies: A Case of Selected Companies in Zambia (2019-2021)

Abstract

The objective of this research project is to compare the effects of corporate governance on the financial performance of publicly traded and privately held businesses. The following are this study's main goals: 1. To determine how board composition affects the financial performance of both private and public companies in Zambia; 2. To evaluate the connection between CEO duality and the financial performance of both private and public companies in Zambia; 3. To examine and compare the impact of independent committees on the financial performance of both private and public companies in Zambia; and 4. To look into the difference in average financial performance between private and public companies in Zambia. The study population consisted of all the 22 firms listed on the Lusaka Stock Exchange (LUSE). A sample size of 7 firms was chosen for this study utilizing random sampling techniques. A sample size of 165 individuals was chosen for this study utilizing both convenient sampling and purposive sampling techniques. Information reduction strategy was applied utilizing Microsoft Excel 2016 and the Statistical Package for Social Sciences (SPSS) version 26 to summarize the data. Descriptive statistics and statistical tests such as t-test, regression, and difference of two means were used in data analysis. The study unearthed a complex association between board size and financial performance across public and private sectors. Contrary to conventional beliefs, larger boards in private companies exhibited enhanced financial metrics. However, Public companies performance showed a gradual board size increase, diverging from anticipated trends. Surprisingly, CEO duality exhibited detrimental effects on financial performance in both public and private sectors, agreeing with existing assumptions. The study suggests a re-evaluation of the CEO's role in driving financial outcomes. The role of independent committees unveiled a stronger relationship with improved financial performance in public compared to the private sector, calling for tailored strategies based on ownership structures and industry regulations. Finally, significant disparities emerged in financial performance metrics between public and private entities, with public companies showcasing higher financial performance measures. In line with these findings, it has recommended that corporate Boards and Governance Committees tailor governance strategies considering sector-specific dynamics; conduct specialized training programs for stakeholder education; adapt regulations to ensure parity between public and private entities; foster forums for best practices sharing among enterprises. Key Words: Performance, Financial, board composition, board size, independent committee