The Moderating Effect of External Regulation on the Relationship between Transformational Leadership and Enterprise Risk Management Adoption by Commercial State Corporations in Kenya

Abstract

Background of the Study: Commercial State corporations in Kenya are required to comply with both internal and external regulations that include, applicable laws and regulations, international and national standards, code of conduct, prudential and financial guidelines, and industry regulations among other regulations.

Objective of the study: This study sought to determine the moderating effect of external regulation on the relationship between transformational leadership and enterprise risk management adoption by Commercial State Corporations in Kenya.

Methodology: This study adopted a positivist research philosophy and cross-sectional survey design approach. Target population comprised of all the 52 Commercial State Corporations in Kenya listed in the register of State Corporations Advisory Committee in January 2021. Census method was applied, and all members of the top management team were enumerated as respondents. The study achieved a response rate of 76% with the return of 276 questionnaires. The study used primary data which was collected through structured questionnaires. Descriptive and inferential statistics were employed in the analysis. The Statistical Package for Social Sciences (SPSS) was used in regression modeling for prediction and causal inferences between study variables.

Results and Findings; The study finding indicated a significant moderating effect of External Regulation in the relationship between Transformational Leadership and Enterprise Risk Management (ERM) adoption by Commercial State Corporations in Kenya.

Reccommedations: The study recommends the mainstreaming and alignment of internal polices of commercial state corporations through continual to external regulations with periodic use of external consultancy to augment enterprise risk management adoption. It also recommends that the top management team of commercial state corporations ought to periodically review their reporting charter to require periodic reporting on compliance to external regulation.