Journal of Finance and Investment Analysis

An Empirical Study on the Moderating Effect of Public Governance on the Relationship Between Fiscal Decentralization and Performance of County Governments in Kenya

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  • Abstract 
    Various attempts undertaken by Kenya to restructure governance and public expenditure mandates from national to local levels have persisted since the 1960s. The promulgation of a modern constitution in the year 2010 dramatically and emphatically deconstructed the post-independence structure of government to a multi-layered system of governance. This paper uses panel data to investigate the effect of public governance on the relationship between fiscal decentralization and performance of County Governments in Kenya between the years 2013- 2018. The key indicators of public governance include human capital, accountability and compliance with the laws. Three indicators of fiscal decentralization were identified as equitable revenue from National Government, local revenues and transfer grants from other development partners. Performance was assessed in terms of how governments promote the wellbeing of citizens, through reduction of poverty and inequality levels, and a general increase in the living standards at the family, corporate and societal level. In order to measure and explain performance, consumption of food and non-food items were computed and summed up per county. Multiple regression and correlation analysis were used to estimate both the direct and interaction effects of the parameters of the model. The study was descriptive and the panel datasets offered a comprehensive profile of the variables identified in the conceptual framework. Results indicate that Public Governance had a moderating influence on the relationship between fiscal decentralization and the performance of county governments in Kenya. 

    JEL classification numbers: B26 
    Keywords: Fiscal Decentralization, Public Governance, County Governments, Performance.