CORPORATE GOVERNANCE MECHANISMS AND PERFORMANCE OF TRAVEL AGENCIES AND TOUR OPERATORS IN MOMBASA COUNTY, KENYA

Abstract

The use of tour operators and travel agents are the two well-known intermediaries in the tourism industry that help distribute information about tourist destination. However, the performance of tour operators and travel agents has been on the decline in the recent past. The basic rationale of corporate governance mechanisms is to increase the performance of firms. However, the effect of corporate governance mechanisms on firm performance is one of the most controversial research questions. The link between corporate governance and firm performance is still not fully established. The purpose of this study was to examine the effect of corporate governance mechanisms on performance of travel agencies and tour operators in Mombasa County, Kenya. Specifically, t he study examined the effect of board meetings, board independence, board composition and board size on performance of travel agencies and tour operators in Mombasa County, Kenya. The theoretical framework was anchored on the agency theory, stewardship theory, and stakeholder theory . The study employed the correlational, cross-sectional survey research design to test non-causal relationships among study variables. The target population consisted of 40 travel agencies and 121 tour operators in Mombasa County, Kenya. The proportionate stratified random sampling technique was utilized to select a sample size of 29 travel agencies and 86 tour operators in Mombasa County, Kenya. The unit of observation consisted of the chief executive officer, while the unit of analysis consisted travel agency and tour operator. A pilot study was conducted to ascertain the validity and reliability of the constructed survey questionnaire. The pilot trial sample size consisted of 9 travel agencies and 26 tour operators in Mombasa County, Kenya. The pilot study results suggested that the items in the developed survey questionnaire had acceptable validity and acceptable reliability. A cross-sectional survey-based approach was used to collect primary data. With the help of 3 research assistants, the researcher utilized the drop and pick method to distribute a total of 115 survey questionnaires. The collected data were processed and entered into the statistical package for social sciences (SPSS) version 26 to create a data sheet used for statistical analysis. The collected d ata was analyzed using descriptive statistics and inferential statistics. The Pearson’s product moment correlation analysis was performed to confirm or deny the relationship between the study variables. The Pearson’s correlation results showed that board meetings, board independence, board composition and board size had positive and significant relationship with the performance of travel agencies and tour operators in Mombasa County, Kenya. A standard multiple linear regression analysis was performed with the performance of travel agencies and tour operators as the dependent variable and board meetings, board independence, board composition, and board size as the predictor variables. The regression results indicated that board meetings, board independence, board composition and board size had positive and significant effect on performance of travel agencies and tour operators in Mombasa County, Kenya. The study recommended that it is imperative for the management of the travel agencies and tour operators to strengthen their corporate governance mechanisms. The policy makers should consider initiating policy review to encourage the board of directors to strengthen the corporate governance mechanisms to foster the performance of travel agencies and tour operators in Kenya . The study pointed to several intriguing paths for future research. For instance, future researchers should consider examining the moderating effect of board gender diversity on the relationship between corporate governance mechanisms and firm performance in other sectors or contexts. Key terms: Board Composition, Board Gender Diversity, Board Independence, Board Meetings, Board of Directors, Board Size, Corporate Governance, Firm Performance CITATION : Ochieng, A. O., & Kising’u, T. (2023). Corporate governance mechanisms and performance of travel agencies and tour operators in Mombasa County, Kenya. The Strategic Journal of Business & Change Management, 10 (3), 551 – 596. DOI: http://dx.doi.org/10.61426/sjbcm.v10i3.2726