This paper examines how the application of penalties influences the effectiveness of corporate governance in enhancing the performance of State-Owned Enterprises (SOEs). Anchored in agency and stakeholder theories, the study employs moderated multiple regression analysis using data drawn from executive managers, board members, and customers across 52 SOEs. The findings show that penalties partially strengthen the relationship between adherence to governance frameworks and organisational performance, particularly in respect of internal controls and customer orientation. When penalties are introduced as a moderator in the relationship between internal controls and SOE performance, R² increases from 0.218 to 0.231, with adjusted R² rising from 0.212 to 0.222. A similar improvement occurs for customer orientation, where R² increases from 0.794 to 0.797 and adjusted R² from 0.792 to 0.794. Conversely, penalties behave more as an independent predictor than a moderator in the relationship between transparency and SOE performance. In this case, the inclusion of the interaction effect results in a marginal increase in R² from 0.387 to 0.390 and in adjusted R² from 0.382 to 0.383. In the relationships involving board oversight and operational control, penalties show no moderating effect. For board oversight, R² remains constant at 0.391 while adjusted R² decreases from 0.387 to 0.384. Likewise, for operational control, R² remains unchanged at 0.473, with adjusted R² decreasing slightly from 0.469 to 0.467. Overall, the study demonstrates that the moderating effect of penalties is uneven across governance dimensions. While penalties enhance the performance effects of some governance mechanisms, they have limited or no impact on others. These findings highlight the need for context-specific enforcement mechanisms and tailored regulatory approaches. The paper recommends strengthening legislative frameworks to incorporate enforceable, benchmark-aligned penalties that promote compliance, accountability, and improved performance in Zimbabwean SOEs.
Manungo et al. (Sat,) studied this question.