The main purpose of this study is to assess the effectiveness of the Board composition on Organizational Performance of State-Owned Enterprises in Tanzania. In particular, the study aims at determining the impact of board expertise on the performance of the State-Owned Enterprises. Furthermore, to determine the impact of board size on the performance of the State-Owned Enterprises; to assess an effectiveness of board independence on the performance of the State-Owned Enterprises; to assess impact of board diversity on the performance of the State-Owned Enterprises.
The study will be using a mix of both qualitative and quantitative research techniques, whereby relevant State-Owned Enterprises in Tanzania will be assessed. The data will be collected from both primary and secondary sources and analyzed qualitatively and quantitatively. The findings will assist the Government of Tanzania to come with the best strategies which are influential and significant for financial, Operational performance of the State-Owned Enterprises in Tanzania. Therefore, the study will suggest the relevant board composition which can play significantly and effectively roles on the State-Owned Enterprises' performance.
TABLE OF CONTENT
ABSTRACT
LIST OF ABREVIATIONS
TABLE OF CONTENT
CHAPTER ONE
1.0 Chapter Overview
1.1 Background
1.2 Statement of Problem.
1.3 Research Objective
1.3.1 General Research Objective
1.3.2 Specific Objectives
1.3.3 Research Questions
1.4 Significance of the Study
1.5 Organization of the Study
CHAPTER TWO LITERATURE REVIEW
2.1 Overview
2.2 Conceptual Definitions
2.2.1 Corporate Governance
2.2.2 The Board of Directors and Board of Composition
2.2.3 State -owned enterprises or Publicly State owned Enterprises
2.2.4 Board Size
2.2.5 Board Members’ Expertise
2.3 Board independence
2.4 Theoretical Literature Review
2.5 Empirical Literature Review
2.6 Policy Review
2.7 Research Gap
2.8 Conceptual Framework
CHAPTER THREE RESEARCH METHODOLOGY
3.1 Overview of the Chapter
3.2 Research Philosophy
3.3 Research Approach
3.4 Research Design and Strategy
3.5 Area of Study and Population
3.6 Sampling Frame
3.7 Sampling Procedures
3.8 Sample Size
3.9 Data Collection Methods
3.10 Source of Data and Methods of Collection
3.11 Variables and Measurement Procedure
3.11 Research Instrument and its Validation
3.12 Data Processing and Analysis
3.13 Validity and Reliability Procedure
3.14 Ethical Consideration
3.15 Expected Results of the Study
4. RESEARCH ACTIVITIES OR SCHEDULE
5. WORKPLAN
6. ESTIMATED RESEARCH BUDGET
7. TIME OF COMMENCING AND COMPLETING STUDY
8. REFERENCE
9. APPENDICES
9.1 Proposed Work plan and Schedule of Activities
9.2 Budget for the Study
9.3 Assumptions for the Multivariate Regression Model:
(a) Homoscedasticity of residuals
(b) Normality of residuals
(c) Linearity of residuals
(d) Independence of residuals
9.4 Draft Survey Questionnaire
ABSTRACT
The main purpose of this study is to assess the effectiveness of the Board composition on Organizational Performance of State-Owned Enterprises in Tanzania.
In particular, the study aims at determining the impact of board expertise on the performance of the State-Owned Enterprises; to determine the impact of board size on the on the performance of the State-Owned Enterprises; to assess an effectiveness of board independence on the performance of the State-Owned Enterprises; to assess impact of board diversity on the performance of the State-Owned Enterprises.
The study will be using a mix of both qualitative and quantitative research techniques, whereby relevant State Owned Enterprises in Tanzania will be assessed.
The data will be collected from both primary and secondary sources and analyzed qualitatively and quantitatively. The findings will assist the Government of Tanzania to come with the best strategies which are influential and significant for financial, Operational performance of the State-Owned Enterprises in Tanzania. Therefore, the study will suggest the relevant board composition which can play significantly and effectively roles on the State-Owned Enterprises performance
LIST OF ABREVIATIONS
Abbildung in dieser Leseprobe nicht enthalten
CHAPTER ONE
1.0 Chapter Overview
This chapter gives the background to the study and the statement of the research problem. It also provides the general objectives and specific objectives of the study. It finally gives the significance of the study.
1.1 Background
Effective board of directors has been an important instrument for ensuring the managers and directors performing their duties and responsibilities based on commitments and placidity which contribute to better performance.
Gallena et al., (2019), Corporate governance is established in every entity so as to achieve the entity’s business-main objectives and to ensure the business is operating smoothly in compliance with the required procedures and regulations.
Elhawary, (2021), the board and its sub-committees have the oversight role of ensuring decisions are made within the corporate governance framework to improve governance efficiency. International Best Practices, Corporate governance of state-owned companies aims to achieve three broad objectives. According to guidelines by the OECD, the World Bank Group, and others, international best practices broadly aim to professionalize the state as an owner; to make SOEs operate with similar efficiency, transparency and accountability as good practice private enterprises; and to ensure that competition between SOEs and private enterprises, where such occurs, is conducted on a level playing field (Hegazy, A and A. N. Lopez, 2022).
Moldova has elements of a public corporate governance regime. It follows a centralized model with one state body (The Public Property Agency) that exercises ownership rights on behalf of the state and has adopted laws over time to help guide the regime governing the operations of public corporations, (Hegazy, A and A. N. Lopez, 2022).
According to a self-assessment survey, Moldova’s legal and institutional framework fares above average on an SOE governance index relative to other countries in central, eastern, and south-eastern European economies, (Hegazy, A and A. N. Lopez, 2022).
However, shortcomings are evident on several fronts legal, institutional, and operational calling for a thorough review of the existing governance framework. For example, the lack of a corporate governance code and the lack of independence of company directors; and fragmented institutional arrangements for company oversight are among many factors undermining Moldova’s governance framework, (Hegazy, A and A. N. Lopez, 2022).
The quality of governance crucially affects corporate outcomes and may be particularly important for state-owned enterprises (SOEs) not disciplined by market competition forces, (Audinga. B et al., 2021).
Strong governance frameworks for public enterprises have long been an anchor of stability and efficiency underpinning their financial operations and performance.
Cross-country experiences with the adoption of robust legal, regulatory and institutional arrangements in line with international best practices proved critical in reducing well-known risks and vulnerabilities from such companies, clarifying the role of the state, improving the management of state assets, and ensuring a level playing field for the private sector to prosper, (Hegazy, A and A.N. Lopez, 2022).
Moldova’s large public enterprise sector of over 900 companies faces elevated risks that amplify fiscal and macroeconomic vulnerabilities and undermine market competition, productivity, and private investment. Moldova stands to greatly benefit from strengthening its public corporate governance regime to put its public enterprises on a stronger footing, address vulnerabilities, and improve market structure (Hegazy, A and A.N. Lopez, 2022).
South African state-owned entities (SOE) are plagued by structural and operational problems including financial mismanagement and ineffective corporate governance (Sixolile, 2018)
Even though government has increased guarantees on more than one occasion to several SOEs, these entities continue to find themselves in precarious financial positions with little or no improvement to their performance and in a state of perpetual financial distress (Marimuthu, 2020).
According to Kihara, (2016), Public Corporations performance is associated with transparency and accountability in implementations of duties and responsibilities in an organization.
1.2 Statement of Problem.
International Best Practices, Corporate governance of state-owned companies aims to achieve three broad objectives. According to guidelines by the OECD, the World Bank Group, and others, international best practices broadly aim to professionalize the state as an owner; to make SOEs operate with similar efficiency, transparency and accountability as good practice private enterprises; and to ensure that competition between SOEs and private enterprises, where such occurs, is conducted on a level playing field (Hegazy, A. and A.N. Lopez).
South African state-owned entities (SOE) are plagued by structural and operational problems including financial mismanagement and ineffective corporate governance (Sixolile, 2018). Even though government has increased guarantees on more than one occasion to several SOEs, these entities continue to find themselves in precarious financial positions with little or no improvement to their performance and in a state of perpetual financial distress (Marimuthu, 2020).
In Tanzania, annually Government injects more funds as still the SOEs have been under-capitalized for a long time, Dr. Josaphat Kweka (2019).
The dilemma emanates from the lack of justification as to why the boards of directors are not helpful to the State-Owned Enterprises to perform better. Based on this, the study will explore the effectiveness of the board composition in steering State-Owned Enterprises performance. Therefore, this study’s findings will provide policymakers with useful relevant and empirical suggestions regarding corporate governance in Tanzania. Policymakers should, therefore, consider firm-specific characteristics in reviewing or developing corporate governance regulations. Also this study will expand previous understandings of the research in the context of Corporate Governance, thus, filling the contextual gap.
1.3 Research Objective
1.3.1 General Research Objective
The main objective of this study is to assess effectiveness of the Board composition on Organizational Performance of the State-Owned Enterprises in Tanzania.
1.3.2 Specific Objectives
i. To examine the impact of board expertise on the on the performance of the State-Owned Enterprises.
ii. To find out the effectiveness of board size on the on the performance of the State-Owned Enterprises.
iii. To examine the effectiveness of board independence on the performance of the State-Owned Enterprises.
iv. To examine the effectiveness of board diversity on the performance of the State-Owned Enterprises
1.3.3 Research Questions
I. What is the impact of board expertise on the performance of State-Owned Enterprises?
II. What is the effectiveness of board size on the performance of state-Owned Enterprises?
III. What is the effectiveness of board independence on the performance of State-owned Enterprises?
IV. What is the effectiveness of board diversity on the performance of State-Owned Enterprises?
1.4 Significance of the Study
The study findings will enhance new knowledge about the problem. It can be used as input for future decisions by policymakers in understanding the study. Also Adds up empirical findings on the existing body of academic knowledge.
1.5 Organization of the Study
This chapter comprises a literature review, which includes a theoretical literature review, empirical literature review, and conceptual framework. The third chapter presents the research methodology which defines the ways that will be used to collect and process data and information about the study. It includes research design, area of the study, target population, sample size and sampling techniques, data collection method and the data analysis approach.
CHAPTER TWO LITERATURE REVIEW
2.1 Overview
This chapter provides conceptual definitions, theoretical literature review, empirical literature review, Policy Review (where necessary), research gap, conceptual and theoretical framework.
2.2 Conceptual Definitions
2.2.1 Corporate Governance
Corporate Governance is defined as a set of rules that governs the established relationship between an entity’s shareholders, the Government, management, suppliers, staff and other stakeholders both from within and outside the entity (Setyahadi & Narsa, 2020). This concept emerged as a result of problems that arise in the principal-agent relationship of owners and managers (Widiatmoko, 2020). One of the CG’ role is to manage agency conflicts between principals (owners) and agents (managers) (Kyere & Ausloos, 2021).
2.2.2 The Board of Directors and Board of Composition
Internationally recommended practices on SOE board practices, board of directors plays a central function in corporate governance and performance of stateowned enterprises. The board has an ultimate responsibility, including through its fiduciary duty, for developing corporate strategies and overseeing SOE performance. In this capacity, the board acts fundamentally as an intermediary between the state as a shareholder, and the company and its executive management. This role is no less important in state-owned enterprises than in private companies. The boards should be assigned a clear mandate and ultimate responsibility for the enterprise’s performance, according to the OECD recommendations, the board should be charged with a duty to act in the interests of both of the state and the company. OECD, (2018) Professionalizing Boards of Directors of State-Owned Enterprises: Stocktaking of National Practices The role of boards should be clearly defined in legislation, preferably according to company law. The board should be fully accountable to the owners, act in the best interest of the enterprise and treat all shareholders equitably. Boards should effectively carry out their functions of setting strategy and supervising management, based on broad mandates and objectives set by the government. Meanwhile Board composition should allow the exercise of objective and independent judgement. All board members, including any public officials, should be nominated based on qualifications and have equivalent legal responsibilities, OECD, (2018) Professionalizing Boards of Directors of State-Owned Enterprises: Stocktaking of National Practices.
2.2.3 State -owned enterprises or Publicly State owned Enterprises
Publicly-owned enterprises can be joint stock companies or limited liability companies, and they comprise financial and non-financial enterprises. Financial state-owned enterprises are mostly public finance institutions such as the central bank, government development bank and other financial institutions performing financial and fiscal services for the state. Non-financial state-owned enterprises provide services on a non-commercial basis, undermining price competition, Anto. B., et al (2018)
Publicly-owned enterprises According to IMF classification, publicly-owned enterprises are owned or controlled by the state, which means that enterprises which are minority-owned by the state are also publicly-owned enterprises. According to Croatian legislation, publicly-owned enterprises are enterprises majority-owned and controlled by the government producing goods and services for the wider public. The operations of publicly-owned enterprises should integrate the elements of public responsibility and market approach. Elements of public responsibility are manifested in the fact that major business decisions are made by the government, that the profit (as well as the loss) goes into the state budget, while the enterprise, in performing its operations, is accountable to the society as a whole, i.e. to the Parliament as the custodian of public interest. Elements of market approach are primarily manifested in the fact that publicly-owned enterprises are expected to maintain financial health in the long run, that they undergo constant market valuation, and that the prices they set are based on operating costs, Anto. B., et al (2018
According to the European Union, (2016) State-Owned Enterprises (SOEs) are defined as those companies where, for various reasons, the state exercises control. The ownership arrangements and the governance structures vary across countries and sectors. This shows that every country has its own forms of ownership of SOEs.
In Tanzania context, the definition of SOEs has been well articulated in the Public Corporations Act, (1992); where in this Act SOEs have been termed as Public Corporations referring to any corporation in which the government or its agents owns majority of the shares or is the sole shareholder.
These definitions have a clear indication that SOEs are engaging in different businesses in which the government as partner takes part in the ownership of the shares, where it can own all the shares as in the case of Government of United Republic of Tanzania, or majority of the shares. Since the 1930s, and particularly after the World War II, numerous SOEs, also called Public Enterprises (PEs) or Public Corporations (PCs), were created in both developed and developing countries to address market deficits and capital shortfalls, promote economic development, reduce mass unemployment, and ensure national control over the overall direction of the economy especially in developing countries (UN, 2008).
These organizations produce a broad range of goods and services such as power, communications, steel, fertilizers, automobiles, petrochemicals etc. The performance of these public enterprises varies widely within and between countries, but their record has frequently been poor, particularly in developing countries.
There is no universally agreed definition of an SOE.2 However, a working definition is that an SOE is any commercial entity in which the government has significant control through direct and indirect ownership. An enterprise that is 100% government-owned is obviously categorized as an SOE. But other enterprises may also qualify as SOEs, such as (1) those in which the government has a majority equity stake; and (2) those in which the government owns a minority stake, but the government retains a controlling vote in major financial and management decisions—as is commonly the case. A variety of other organization models within the SOE sector also includes corporate and no corporate structures, Edimon, G. and N.Kaukab (2020)
2.2.4 Board Size
Board size refers to the number of board members that constitutes the board. The relationship that exists between size of the board of executives and the achievement of Public Authorities and other bodies are mixed up. Some researchers and scholars support that large size of a board is appropriate for the performance of Public Authorities and other bodies whereas others support that small size of a board suffices for the performance of Public Authorities and other bodies. Merendino and Melville (2019) argue that optimal board size improves firm’s performance. The research study will also assess the impact of board size on firm performance. Using a Colombian sample of 84 large Chinese listed firms from 2001 to 2005, companies Orozco et al., (2018) findings show that there is a positive relationship between board size and firm performance. Puni and Anlesinya (2020) and Prashar and Gupta (2020) studies show similar findings (that there is a positive relationship between board size and firm performance). On the other hand, Kao et al., (2019) findings show a negative link between board size and firm performance. However, Assenga, et al., (2018) and Shao (2019) findings did not show any significant relationship between board size and firm size.
2.2.5 Board Members’ Expertise
Board member’s expertise is explained as the one skill he or she poses. Yusoff and Fauzia, (2010), board members’ expertise is the individual knowledge and skill a board member possesses that could have attained through education and various experiences. However, the combined knowledge and skill of a member in the board are intangible assets but are related with the performance of Public Authorities and other bodies. In addition, qualified and experienced board members are strategic resources and their experience and knowledge are found critical to the performance of State Owned Enterprises.
2.3 Board independence
A report about OECD Guidelines on Corporate Governance of State-Owned Enterprises states that governments often lack an effective legal and regulatory framework to support the independence and autonomy of SOE board members. In many countries, SOE boards are not adequately empowered to undertake such a role, are hampered by direct ministerial appointments of executive management, and/or are bypassed through informal channels of communication and instructions. The report also suggests that lack of disclosure about the nomination and election process often hinders the performance of boards. According to these findings, policymakers could consider the following issues when organizing and professionalizing boards of directors of SOEs, the Organization for Economic Co-operation and Development, OECD (2018), Professionalizing Boards of Directors of State-Owned Enterprises: Stocktaking of National Practices Board independence should not be confused with independent directors. An independent and objective board is one that operates under a legal and regulatory framework that is subject to public governance and is designed based on board profiles. Independent directors (subject to national definitions) are individuals who are not directly representing any particular stakeholder interest in the company, but who are sought to bring certain skills and competencies to the board, the Organization for Economic Co-operation and Development (OECD) (2018), Professionalizing Boards of Directors of State-Owned Enterprises: Stocktaking of National Practices The SOE Guidelines recommend that SOE boards of directors should be composed so that they can exercise independent and objective judgment and the board can effectively guide the SOE toward serving the interests of both the company and its shareholder. It is recommended to ensure transparency regarding the rules and principles guiding SOE board composition, the Organization for Economic Co-operation and Development, OECD (2018), Professionalizing Boards of Directors of State-Owned Enterprises: Stocktaking of National Practices.
2.4 Theoretical Literature Review
The theoretical literature review is based on the review of the different literatures that explain the happening of something but have not yet been tested. This section presents the explanation of key terms and theories that have been used in the study.
Theories of agency and resources dependence will be used in reviewing the literature and developing research hypotheses since one single theory is not enough to explain the relationship between board aspects of governance and firm performance (Assenga et al., 2018 and Shao 2019). Hooghiemstra et al. (2019) contend that efficient monitoring of the board of directors can reduce agency problems by controlling the CEO’s and the top managers’ opportunistic and self-interest behaviors.
2.5 Empirical Literature Review
According to the European Union, (2016) State-Owned Enterprises (SOEs) are defined as those companies where, for various reasons, the state exercises control. The ownership arrangements and the governance structures vary across countries and sectors. This shows that every country has its own forms of ownership of SOEs.
International Best Practices Corporate governance of state-owned companies aims to achieve three broad objectives. According to guidelines by the OECD, the World Bank Group, and others, international best practices broadly aim to professionalize the state as an owner; to make SOEs operate with similar efficiency, transparency and accountability as good practice private enterprises; and to ensure that competition between SOEs and private enterprises, where such occurs, is conducted on a level playing field Hegazy, A and A.N. Lopez, (2022).
Moldova has elements of a public corporate governance regime. It follows a centralized model with one state body (The Public Property Agency) that exercises ownership rights on behalf of the state and has adopted laws over time to help guide the regime governing the operations of public corporations, Hegazy, A and A.N. Lopez, (2022).
However, shortcomings are evident on several fronts legal, institutional, and operational calling for a thorough review of the existing governance framework. For example, the lack of a corporate governance code and the lack of independence of company directors; and fragmented institutional arrangements for company oversight are among many factors undermining Moldova’s governance framework, Hegazy, A and A.N. Lopez, (2022), Strong governance frameworks for public enterprises have long been an anchor of stability and efficiency underpinning their financial operations and performance. Cross-country experiences with the adoption of robust legal, regulatory and institutional arrangements in line with international best practices proved critical in reducing well-known risks and vulnerabilities from such companies, clarifying the role of the state, improving the management of state assets, and ensuring a level playing field for the private sector to prosper, Hegazy, A and A.N. Lopez, (2022).
Moldova’s large public enterprise sector of over 900 companies faces elevated risks that amplify fiscal and macroeconomic vulnerabilities and undermine market competition, productivity, and private investment. Moldova stands to greatly benefit from strengthening its public corporate governance regime to put its public enterprises on a stronger footing, address vulnerabilities, and improve market structure Hegazy, A and A.N. Lopez, (2022), The media is constantly publicizing South African SOEs in a negative light, especially that of their poor performance resulting in their inability to meet their financial obligations and hence, calling upon government to bail them out (Marimuthu, 2020).
Some state-owned enterprises are facing significant financial distress during the pandemic and economic crisis. Some operate in core sectors of the economy and provide basic services and may need support to avoid collapse, raising the question whether governments should provide temporary exceptional financial assistance. This note discusses guiding principles to help decide when countries should intervene to help these companies, and how this support can be done given the financial constraints of governments. It is also imperative that governments strengthen oversight and firm governance to ensure public resources are well used. While the focus on this note is on Africa, these principles are applicable across other regions. Not all SOEs are unprofitable and some do have the potential to be profitable and make a positive contribution to the public finances and the economy more broadly. Some SOEs can also be profitable even under adverse macroeconomic circumstances, Bruno, H. et al (2020)
State owned enterprises to re-evaluate themselves and provide the government with recommendations to improve the business environment in order to increase their productivity and contribute better towards the implementation of the Second Five-Year National Development Plan (2016/17 – 2020/21). There is a misconception that public institutions should not be doing business, and that when they actually engage in business, they must succumb to loss.
There are many examples of public institutions all over the world who have ventured and done well in business, such as; Petrobras of Brazil, Statoil of Norway, and CNOOC of China from the oil & gas industry, who have operated with a profit and have managed to invest beyond their borders. Tanzania has 264 government owned institutions, noted that 65 of them commercially driven corporations, 187 for service provision in addition to 12 regulators. Of the 65 commercially driven entities, eight of them still operate on government subsidies while 57 operate profitably, For the financial year 2015/16 the government received a dividend of TZS 119,202,609,969 from 16 public enterprises of which the government has shares. In addition, the government also received TZS 303,765,417,114.68 into its government basket as a contribution from 13 institutions Government’s recommendations were on how to make these institutions sustainable, to grow exponentially, and overall – contribute to the national income,” stressed Hon. Majaliwa, pointing out that “innovation and proper allocation of resources” are key factors for making this possible.
Prime Minister of the United Republic of Tanzania Hon. Kassim Majaliwa (MP), (2017).
Government expectations from the public institutions addressing their Board Chairpersons and CEOs to identify how public institutions can contribute towards the implementation of the second five-year development plan in the context of building an economy based on industrialization; to recommend how public institutions can productively cooperate with each other in implementing certain projects; to outline what kind of legal and structural reforms should be undertaken by government so that public institutions can overcome hindering laws and delays from civil servants and executives with a business as usual attitude; to identify risks facing public institutions in participating directly in the implementation of the second five-year development plan, and to recommend solutions for them; to advise best methods of how to implement recommendations from the public institutions without jeopardizing the primary responsibility of the establishment of respective institutions. Public institutions are an important pillar in implementing this development plan because this public sector estate is a key player in improving social services, generating human resources with the proper expertise, building infrastructure, producing goods, and providing services of good quality to contribute to government income and also foreign currency, the Minister for Finance and Planning, Hon. Dr. Philip Mpango (2017).
To realize its vision of becoming a middle-income country by 2025, the Tanzanian government through its Five Year Development Plan II (2016/17-2020/21) has prioritized industrialization as the key driver of economic transformation.
However, despite the priority attached to industrialization, the structure of the economy shows a manufacturing deficit. For instance, to date, the manufacturing sector has played a much smaller role in driving growth and job creation, contributing less than 10% of GDP and employing around 3% of the labor force. In many countries, particularly in East Asia, state-owned enterprises have been critical stakeholders responsible for translating national industrialization agendas into tangible results.
The dialogue examined how SOEs have facilitated the industrialization agenda in other countries, and how SOEs can take advantage of opportunities and meet the challenges emerging during the process of industrialization, Dr. John Page (2019) and Dr. Josaphat, K. (2019). Growth in SOEs is a global phenomenon, but countries differ on the extent they have harnessed the sector to support economic transformation, (PwC, 2015).
Shows that the proportion of SOEs among Fortune Global 500 corporations has grown from 9% in 2005 to 23% in 2014, including a greater presence in the top rankings, largely driven by China. However, the role of SOEs varies significantly between countries. For instance, the contribution of SOEs to GDP ranges from 2% in Indonesia to over 33% in Vietnam. Many East Asian economies achieved success with a large SOE sector. SOEs were key drivers of economic development in East Asia. The strategies of individual countries in leveraging SOEs varied considerably but some elements were common across all countries, Dr. Josaphat, K. (2019)
Clearly, the Government is advised to reform/re-engineer SOEs which are highly profitable but with very low social value. On the other hand, the Government should exist/abandon or divest SOEs which are both loss making with low social value; and embrace (promote) those that are both highly profitable with significant social value as role models. A “back the winners” approach. State support was focused on strategic sectors and enterprises that contributed to transforming the economy. Where necessary, hard reforms were adopted which allowed divestiture to foreign direct investment (FDI) of poorly performing SOEs with the government taking majority or minority shares. Alignment and partnership with the private sector. The private sector was viewed as a critical partner in formulating and implementing national industrialization strategies. Underlying this collaboration was the strong need for public-private sector dialogue to ensure that activities of the two sectors were coherent not contradictory. In Singapore, SOEs and foreign direct investment (FDI) were combined as government-linked corporations (GLCs). In effect, the government used to run Singapore as a business entity. industrialization. Dr. Page. John Growth in SOEs is a global phenomenon, but countries differ on the extent they have harnessed the sector to support economic transformation. A recent study (PwC, 2015) shows that the proportion of SOEs among Fortune Global 500 corporations has grown from 9% in 2005 to 23% in 2014, including a greater presence in the top rankings, largely driven by China. However, the role of SOEs varies significantly between countries. For instance, the contribution of SOEs to GDP ranges from 2% in Indonesia to over 33% in Vietnam. Many East Asian economies achieved success with a large SOE sector. SOEs were key drivers of economic development in East Asia. The strategies of individual countries in leveraging SOEs varied considerably but some elements were common across all countries, Dr. Josaphat Kweka (2019)
Currently, around 270 fully registered SOEs are operating in Tanzania, managed under the Office of the Treasury Registrar. They are clustered around major sectors of the economy, including power, transportation, water, ICT, land and housing, and financing. Of these entities, the Government has full ownership of 232 enterprises. In total, the investment in SOEs represents about 10% of GDP. In value terms, about 60% of Government investment is held in 10 corporations, of which four are service providers, Page, J. (2018).
However, shortcomings are evident on several fronts legal, institutional, and operational calling for a thorough review of the existing governance framework. For example, the lack of a corporate governance code and the lack of independence of company directors; and fragmented institutional arrangements for company oversight are among many factors undermining Moldova’s governance framework, (Hegazy, A. and A.N. Lopez 2022).
Also, decision-making processes in most SOEs are too bureaucratic, limiting the extent to which SOEs can become competitive and responsive, and independent. Stakeholders remarked strongly on the lack of autonomy in running SOEs; in most cases, executive appointments are politically motivated rather than based on professional competencies. Dr. Josaphat Kweka (2019).
Due to the absence of robust SOEs policy and lack of the National Code of Corporate Governance in Tanzania, the contribution of SOEs in economic growth in the country has been a matter of debate. Some of Challenges facing SOEs are; No policy and strategy to guide Public Enterprises’ role in the Economy, for stance in South Africa and India, for instance, governments declared the goal of SOEs as to contribute to sustainable economic and social development.
Assenga et al., (2018) findings do not show any significant relationship between board composition and firm financial performance.
State-owned enterprises to re-evaluate themselves and provide the government with recommendations to improve the business environment in order to increase their productivity and contribute better towards the implementation of the Second Five-Year National Development Plan (2016/17 – 2020/21). There is a misconception that public institutions should not be doing business, and that when they actually engage in business, they must succumb to loss.
There are many examples of public institutions all over the world who have ventured and done well in business, such as; Petrobras of Brazil, Statoil of Norway, and CNOOC of China from the oil & gas industry, who have operated with a profit and have managed to invest beyond their borders. Tanzania has 264 government-owned institutions, noted that 65 of them commercially driven corporations, 187 for service provision in addition to 12 regulators. Of the 65 commercially driven entities, eight of them still operate on government subsidies while 57 operate profitably, For the financial year 2015/16 the government received a dividend of TZS 119,202,609,969 from 16 public enterprises of which the government has shares. In addition, the government also received TZS 303,765,417,114.68 into its government basket as a contribution from 13 institutions Government’s recommendations were on how to make these institutions sustainable, to grow exponentially, and overall – contribute to the national income,” stressed Hon. Majaliwa, pointing out that “innovation and proper allocation of resources” are key factors for making this possible.
Prime Minister of the United Republic of Tanzania Hon.
Government expectations from the public institutions addressing their Board Chairpersons and CEOs to identify how public institutions can contribute towards the implementation of the second five-year development plan in the context of building an economy based on industrialization; to recommend how public institutions can productively cooperate with each other in implementing certain projects; to outline what kind of legal and structural reforms should be undertaken by government so that public institutions can overcome hindering laws and delays from civil servants and executives with a business as usual attitude; to identify risks facing public institutions in participating directly in the implementation of the second five year development plan, and to recommend solutions for them; to advise best methods of how to implement recommendations from the public institutions without jeopardizing the primary responsibility of the establishment of respective institutions.
2.6 Policy Review
The Public Corporations Act, 1992, Treasury Registrar (Powers and Functions) Act Cap.370 (R. E. 2002) with further amendments of 2011 and Tanzania Investment Act 1997 would be reviewed by the Government in order to improve accountability and reporting on performance evaluation of SOEs. The policy Review will enhance the management of SOEs that needs to be dissociated from political interference by establishing strong independent institutions responsible for managing the sector in order for robust performance management and reporting systems need to be instituted to improve accountability.
2.7 Research Gap
Empirical studies have still not indicated the effectiveness of the board of directors on the performance of government/ public enterprises. Based on the theoretical and empirical literature review state that indicated the effectiveness of the board composition based on the performance of government Parastatals particularly in Tanzania. This study will fill the gap by conducting a study on effectiveness of board of directors’ composition on the State-Owned Enterprises performance in Tanzania.
2.8 Conceptual Framework
Conceptual framework is the explanation on the way the researcher will explore the statement of the research problem; and is a pictorial representation of relationships between constructs or variables of the research study which assist in explaining how a research problem will be explored (Adom et al., 2018). In this study, the State-Owned Enterprises performance in Tanzania is a dependent variable, whereby the board of directors’ composition stands for the independent variables. To begin with, the relationships between the variables are linked to the resource base and institutional theory which portrays that the State-Owned Enterprises performance depends upon the effectiveness of the board based on the size of the board members, board members’ expertise, board members size and board members’ Independence Therefore, the conceptual framework of this study is shown in Figure 1 below:
Abbildung in dieser Leseprobe nicht enthalten
Source: Researcher Construct (2022)
CHAPTER THREE RESEARCH METHODOLOGY
3.1 Overview of the Chapter
Research methodology provides the overall guidelines, means and procedures employed by a researcher in conducting a study (Thomas, 2021). It gives a set of procedures developed to guide researchers on proper selection and application of an appropriate research design (Creswell & Creswell, 2018).
This chapter provides research methodology, which includes research philosophy, research approach, research design and strategy, area of the study and target population, sampling frame, sample size, source of data and methods of collection, variables and measurement procedure. Moreover, chapter three provides research instrument and its validation, data processing and analysis, validity and reliability procedure, ethical considerations and the expected results of the study.
3.2 Research Philosophy
Research philosophy is a part of research methodology which explains researcher’s beliefs and assumptions about knowledge which guides how studies should be conducted (Saunders et al., 2019). According to Saunders et al. (2019), research philosophy explains researchers worldviews grouped into three classes of assumptions; ontology (nature of reality or being) on encountered realities in research, epistemology (acceptable knowledge) on human knowledge and axiology (role of values and ethics) on the degree of how personal values influence the research process
3.3 Research Approach
Research approach for this study is deductive, which is typically used in quantitative research where researcher tests hypothesis for the study (Creswell & Creswell, 2018). The deductive research approach deals with causal relationship between dependent variable and independent variables whose primary purpose is to gain knowledge in unknown areas and to explain why events occur; and it builds, extends or tests theory (Neuman, 2014).
It also uses literatures to develop conceptual framework for subsequent testing (Saunders et al., 2019)
3.4 Research Design and Strategy
Research design is an established procedures for collecting, analyzing and interpreting data on a research study (Creswell & Creswell, 2018). Research strategy is a plan of the researcher of how the study will be undertaken to answer research questions or test research hypothesis and meet research objectives (Saunders et al., 2019)
This study will employ explanatory research design which is usually applied to describe relationships between variables explained in the research problem (Saunders et al., 2019). The explanatory research design will enable the researcher to extensively established a causal relationship between independent variables and dependent variables for this study. Furthermore, this study will employ a survey research strategy for collection of useful data and information to obtain the best results from the study.
The survey strategy is preferred as it is associated with instruments that needed numerical inputs of the parameters used in examining relationships between and among variables; and is used in validating correlation between independent and dependent variables as established in the hypotheses of the study (Creswell, 2014). According to Creswell (2014) survey research provides a quantitative description of trends, attitudes and opinions collected from a sample of the population and is used to test associations between the variables in the hypotheses.
3.5 Area of Study and Population
Population is a full set of subjects or elements with common characteristics from which a researcher select a sample for research study (Saunders et al., 2019). This study will be conducted Tanzania Mainland and Zanzibar where our public enterprises operate in order to include the groups of board members, chief executive officers, management team, Public Enterprises experts, politicians, and other relevant stakeholders as a population. The public enterprises will be selected as a target population because of their Corporate governance impact to the public enterprises. The data and information for the study will be collected from individuals in the targeted groups. Therefore, the selected areas of study will be expected to provide useful data and information on effectiveness of board of director’s composition of Tanzania’s public enterprises.
3.6 Sampling Frame
A sampling frame is a representative of a population and it consists of a list of items or people from which the sample of the study is drawn (Taherdoost, 2016). The sampling frame for this study is made up of 400 participants from the list of 50 Tanzania’s public enterprises.
3.7 Sampling Procedures
Sampling procedure is the way the required sampling units is selected from the target population to obtain a sample for the research study (Kumar, 2019). Sampling procedures applicable to the selection of sample are of two types: probability sampling and non-probability sampling (Saunders et al., 2019). Probability sampling is commonly associated with survey research strategies and non-probability sampling provides a number of alternative techniques to select samples which have become more predominant with the quick growth of online questionnaires (Saunders et al., 2019). Despite being a quantitative research, this study will use purposive sampling, which is non-probability sampling, as it selects sample with a specific purpose in mind (Neuman, 2014). The participants for this study will be purposely selected as they are informative to the research topic. Purposive sampling is usually used when sample selected is very small and when the researcher prefer to select participants who are particularly informative (Saunders et al., 2019). The quantitative research by Dwamena (2021) applied purposive sampling procedure which is in line with this one.
3.8 Sample Size
This study will apply a multivariate regression model for data analysis in testing hypotheses with multiple correlations. In regression analysis, required sample size use to rely on the number of respondents with the desired power, level of alpha, number of dependent variables and expected effect sizes (Tabachnick & Fidell, 2014)
3.9 Data Collection Methods
Both primary and Secondary data collection methods will be used in this study. The books, journals, different reviews, discussion, questionnaire and interview will be used in collecting data.
Kothari, (2004) the interview is a strategy for gathering data through verbal or oral correspondence between the researcher and the respondents. Interviews will be expedited by interview guide instrument. The interview technique will be picked in light of the fact that it will be very adaptable, versatile and applied to numerous individuals and knowledge obtained easily and well explained. The interview will be administered to members of the board. The study will be assuming that data that to be collected from interviews in order to provide accurate and explanatory data/ responses/ information for the study. Saunders et al., (2003) a questionnaire is a data gathering framework in which each individual is drawn closer to respond to a comparative arrangement of request in a fated solicitation. Patton, (2002) Questionnaires are ordinarily utilized instruments to acquire significant data about the population; the technique uses inquiries so as to accumulate data. The questionnaire will be administered to senior staff working in selected State-Owned Enterprises. The technique will help the researcher to gather information within reach and gets a great deal of data on the issue under scrutiny.
Yin, (2003) questionnaires are the economical method for collecting data from a required number of respondents and were only sufficient way to reach a number of reviewers large enough to allow a statistical analysis of the results. A structured questionnaire will be used utilized to gather information from the organization and as well as precise information on a particular matter to consider
3.10 Source of Data and Methods of Collection
This study will employ a structured survey questionnaire method which is preferred for collection of standard data and information from participants. The questionnaire will be in the form of five-point Likert scale which is considered user friendly with indicators ranging from 1 (Strongly Disagree) to 5 (Strongly Agree). Survey questionnaire shall be administered online. Participants can use devices like smartphones, tablets, laptops and desktop computers for responding to online surveys for this study (Beatty et al., 2020).
3.11 Variables and Measurement Procedure
The effectiveness of Board of Directors composition will be analyzed is a dependent variable to the four (4) Board composition characteristics: Board member’s expertise, independence, Board size and current Tanzania based Approach of supervisory and operational system, X1, X2, X3, X4, respectively, which are independent variables. Board composition has consequence to the Corporate Governance; thus, it is a mediating variable, which transmits the effects of independent variables to the CG (MacKinnon, 2001). Table 1 below show the variables and the descriptions and measurements. Therefore, variables and measurements, the research model for this study will be a multivariate linear regression model. There are assumptions on using this model whose violation may cause incorrect inferences. The assumptions are homoscedasticity, normality, linearity, and independence of residuals
3.11 Research Instrument and its Validation
The data and information about effectiveness of board composition’ characteristics, which are independent variables will be collected from selected sample of this study by using structured cross-sectional survey questionnaires where series of pre-determined questions will be sent to participants for responding freely using the Likert scale (Thomas, 2021). This is based from the fact that when collecting data, the questionnaire with Likert scales is one of the protocols which provides rich data relatively easily and simply (Saunders et al., 2019). The latest version of IBM SPSS Statistics will be used to capture data for analysis of relationship between variables.
3.12 Data Processing and Analysis
Data from quantitative survey shall be processed to produce facts, statistics, graphs and charts in order that the researcher can explore, describe, present and examine the relationships and trends from collected data (Saunders et al., 2019). This study will apply multiple regression analysis which is normally used to examine relationship between dependent variable and independent variables and to draw a conclusion from the relationships (Karaca & Cattani, 2019).
3.13 Validity and Reliability Procedure
The survey questionnaire shall be pre-tested for validity and reliability before distributed to participants because any study undertaken without these tests is not expected to yield valuable results (Sürücü & Maslakçi, 2020). Validity concerns with testing questionnaire’s ability to collect intended data and information required and reliability concerns with testing questionnaires in provision of consistent results when measurements are repeated under the same environment. However, as a good number of questions for this study was adopted from Masli (2018).
The pre-test of survey questionnaire shall be conducted to two regulatory authorities for internal consistency and reliability testing of every data and information to be collected. This testing will be validated by use of Cronbach’s alpha formula and its results will be used to amendment the questionnaire. The Cronbach’s alpha formula, which is commonly used in quantitative research requires a coefficient value obtained to be 0.70 or above as an acceptable value indicator, (Mat Nawi et al., 2020).
3.14 Ethical Consideration
Ethics consideration in this research will be observed in compliance with the OUT Research Ethics Guidelines, 2015. The main issues for consideration will include avoiding data fabrication in surveys, data falsification in surveys and plagiarism. In addition, participation in this study will be on voluntary basis and the questionnaires to all participants shall emphasize on confidentiality in the whole process including the use of data, information and personal opinions as provided by participants.
3.15 Expected Results of the Study
Results of the study are expected to validate hypotheses for this research and achieve both general objectives and specific objectives of this study. They study will add knowledge on the public sector enterprises performance and give the researcher justifications for making recommendations to the Government, policymakers and regulatory authorities in particular on issues related BCE’ characteristics and Corporate Governance. Finally, the areas for further research will be proposed.
4. RESEARCH ACTIVITIES OR SCHEDULE
The activities or schedule for this research are provided in Appendix 9.1
5. WORKPLAN
The proposed work plan and schedule of activities is shown under Appendix 9.1
6. ESTIMATED RESEARCH BUDGET
The budget for the study is estimated to be TZS 34.66 million composed of fees structure TZS 6.66 million, direct costs TZS 10.0 million and stipend allowance TZS 18.0 million. Details are provided in Appendix 9.2 The study will be financed by the candidate’s individual income. However, any interested sponsor is welcome.
7. TIME OF COMMENCING AND COMPLETING STUDY
The study commenced on 19th November, 2020 and is expected to be completed on 10th October, 2023.
8. REFERENCE
Kihara, M.N, (2016), Relationship Between Ownership Structure, Governance Structure and Performance of Firms Listed with NSE, Nairobi University,
Afrifa, G. A. and V. Tauringana, (2015), Corporate governance and performance of UK listed small and medium enterprises, Corporate Governance: The international journal of business in society, Vol. 15(5), pp. 719-733.
Assenga, et al, (2018), the he Impact of Board Characteristics on the Financial Performance of Tanzanian Firms, Corporate Governance: The International Journal of Business in the Society, 18(6), pp. 1089-1106.
Hooghiemstra, R. et al (2019). Strangers on the board: The impact of board internationalization on earnings management of Nordic firms. International Business Review, 28(1), 119–134.
Ntim, C. G. (2015), Board diversity and organizational valuation: Unravelling the effects of ethnicity and gender, Journal of Management and Governance, pp. 167-195.
Prashar, A. and P.Gupta, (2020), Corporate boards and firm performance: a meta-analytic approach to examine the impact of contextual factors, International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of print.
Puni, A. and A. Anlesinya, (2020), "Corporate governance mechanisms and firm performance in a developing country", International Journal of Law and Management, Vol. 62 No. 2, pp. 147-169. EU (2016) “State Owned Enterprises in the EU: Lessons Learnt and Ways in a Post Crisis Context” Luxembourg Publication Office.
Revolutionary Government of Zanzibar (2016) “Ministry of State, Presidents Office, Regional Administration and Special Departments” Zanzibar D.C, Dr. Josaphat, K. (2019), The Role of State-Owned Enterprises in Industrialization in Tanzania: Lessons from East Asian Economies
Page, J. (2018). State-owned enterprises and industrialization: Are there lessons for Tanzania? Presentation at UONGOZI Institute forum, 10 July 2018, Dar es Salaam.
International Monetary Fund. (IMF). 2016. “How to Improve Oversight of Public Corporations.” Washington, DC. World Bank and PPIAF. 2017. “Who Sponsors Infrastructure Projects, Really? Disentangling Public and Private Contributions.” Washington, DC.
Bruno, H. et al (2020), Government Support to State-Owned Enterprises: Options for Sub-Saharan Africa, International Monetary Fund, Fiscal Affairs.
BANJUL, (2022), New World Bank Report Identifies Reforms to Improve State-Owned Enterprises
Ashraf, M, (2022), World Bank Country Economist and lead author of the report.
Edimon, G. and N.Kaukab (2020), Reforms, Opportunities, And Challenges for State-Owned Enterprises .
Anto. B., et al (2018), Financial performance of state-owned enterprises, Publisher: Institute of Public Finance No. 5 çJanuary 2018 doi: 10.3326/efiscus.2018.5 ISSN 1849-9317
9. APPENDICES
9.1 Proposed Work plan and Schedule of Activities
Abbildung in dieser Leseprobe nicht enthalten
NB: The detailed plan prepared using Gantt Chart (Microsoft Project) is available.
9.2 Budget for the Study
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Source : Researcher’s Admission Letter for PhD Study
9.3 Assumptions for the Multivariate Regression Model:
The researcher will test and evaluate the following assumptions, whose violation in this study may lead to making incorrect inferences:
(a) Homoscedasticity of residuals
Residuals or errors in regression analysis are difference between the observed and predicted value of dependent variable. The model assumes that the variation in the residuals is similar at every point along the model. Thus, it requires that residuals in the target population to have a zero mean and a constant spread or variance along the regression line. If this assumption is violated, the regression coefficients are still unbiased estimates of their target population but not fully efficient.
(b) Normality of residuals
The model requires residuals to be normally distributed, specifically for hypothesis testing and confidence intervals. Normality of variables will be assessed by using statistical or graphical methods and by looking at the distribution of residuals. Normality has two components; skewness and kurtosis. Skewness deals with the symmetry of distribution and kurtosis deals with peakness of a distribution. Any small departure from normality do not significantly affect the model but major departure affects the model.
(c) Linearity of residuals
The linearity assumption proclaims existence of a straight-line relationship between dependent and independents variables. The researcher will assess linearity by drawing scatter-plots of relationship between each independent variable and a dependent variable. When the assessed variables are normally distributed and found to be linearly related, the scatter-plots will look oval-shaped. However, if one of the variables is abnormal, the scatter-plots between the variables will not looked oval-shaped.
(d) Independence of residuals
The model assumes that residuals are not correlated, that is, are independent. This means that each observation or data point is independent or uncorrelated from another observation or data point. However, this assumption is usually not applicable for time series data.
9.4 Draft Survey Questionnaire
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I am Kulwa N. Aggrey , a PhD student from the Faculty of Business Management at the Open University of Tanzania (OUT). I am conducting a study on effectiveness of the Board of Directors composition and organizational performance pf State- Owned Enterprises in Tanzania.
I would be grateful for your participation in a research survey by responding to the attached questionnaire at your earliest convenient time but preferably within 30 days from when you receive this request. Your experience could contribute valuable insight which would be of benefit in undertaking this study whose significance include contribution to the body of knowledge on the effectiveness of the Board of Directors composition on organizational performance of State- Owned Enterprises in Tanzania and providing information to appointing authorities of board of directors and governing bodies of public entities on the required attributes of board members.
Finally, I would like to assure you that the information and personal opinion which you provide will be kept strictly confidential. I would be extremely grateful if you would complete this online questionnaire which will automatically be submitted to my email account, upon your completion and submission.
Please accept in advance my best wishes and appreciation for your cooperation and attention.
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[...]
- Quote paper
- Kulwa Aggrey (Author), The Effectiveness of the Board Composition on Organizational Performance of State-Owned Enterprises in Tanzania, Munich, GRIN Verlag, https://www.grin.com/document/1316171
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