The impact of corporate governance instruments on the performance of the State-Owned Entities (SOEs) in South Africa

Abstract

The objective of the research is to gain an understanding of the impact that corporate governance instruments have on the performance of State-Owned Entities (SOEs) in South Africa. The SOEs have encountered corporate governance failures, despite the existence of corporate governance instruments. This study is underpinned by the agency theory, as the authority is delegated to various levels within the SOEs to enable the entities to achieve their objectives. The governance instruments that were examined are the number of board members, vacancy rate, number of audit committee members, number of board meetings, restatement of annual financial statements and audit opinion. A sample of 19 SOEs listed in Schedule Two of the PFMA was selected using stratified random sampling method. Secondary data was collected from the annual reports for the period 2014 to 2018. The results reveal, using regression analysis that the number of audit committee members had a significant positive impact on the SOE’s performance, while audit opinion and vacancy rate reflect a significant negative impact on the SOE’s performance. The policy maker should enhance the existing policies on the size of audit committee. This study was limited to quantitative measures and future studies can incorporate the qualitative information.