Corporate Governance, Management Control System and Financial Performance of State-Owned Enterprises in Tanzania

The aim of this paper was to investigate the mediating role of the Management Control System in the relationship between Corporate Governance and the Financial Performance of State-Owned Enterprises in Tanzania. Data were gathered from board members through questionnaires, resulting in a sample of 50 State-Owned Enterprises with 300 respondents. Agency and Contingency theories were employed to explain the effects of the interdependence between Corporate Governance and Management Control System on firm performance. The data were analysed using PLS-SEM, revealing that corporate governance significantly enhances management control systems, which subsequently positively affects the financial performance of state-owned enterprises. However, Corporate Governance and Financial Performance were found to be negatively related. Additionally, Management Control System serves as a mediator in the linkage between Corporate Governance and Financial Performance in Tanzanian State-Owned Enterprises. The findings had practical relevance for boards of directors, Chief Executive Officers, and the Treasury Registrar, assisting them in utilizing Corporate Governance and Management Control System to develop strategies for improving State-Owned Enterprises financial performance. Prior research on the linkage between corporate governance and financial performance did not include Management Control System as a mediating variable, making. The current study fills this gap and adds to the body of literature. However, the findings apply only to commercial State-Owned Enterprises s and do not extend to non-commercial State-Owned Enterprises. Keywords: Corporate Governance, Management Control System, financial performance, State Owned Enterprises