Multiple Regression Analysis

SCHOOL OF BUSINESS AND PUBLIC MANAGEMENT

BUSINESS RESEARCH METHODS                         TERM PAPER

Ndikwe and Owino (2016) undertook a study entitled, “The Influence of Corporate Governance on Financial Performance of Public Secondary Schools in Kenya” They collected primary data and tested the following research hypothesis;

H01:        Board composition has no significant influence on the financial performance of secondary schools in Kenya.

H02:        Board skills have no significant effect on the financial performance of public secondary schools in Kenya.

H03:        The application of corporate governance principles has no significant impact on the financial performance of public secondary schools in Kenya.

H04:        Separation of duties between the boards and management has no significant effect on the financial performance of public secondary schools in Kenya.

The study was guided by the following analytical framework;

FP = β0+β1BC + β2ABS + β3CGP + β4SOD + Ԑi

Where FP= financial performance of public secondary schools in Mathira Constituency

        β0=Constant term

         β1, β2, β3, β4 are beta coefficients

        BC = board composition,

        ABS = available board skills

        CGP = corporate governance principles

        SOD= separation of duties

Ԑ 0 = Error Term

Required

Perform a multiple regression analysis based on the attached data set and answer the following questions.

1. Test the data for the following assumptions of regression analysis and interpret your findings:

1. Normality

Normality was tested using a histogram with a superimposed normal curve as shown below. The graph shows a concentration of the variables at the centre of the histogram. This results show that the data was normally distributed and hence adequate for regression analysis.

[pic 1]

1. Linearity

The study tested the existence of a linear relationship between the financial performance and corporate governance, board skills and board composition. The results in the Table below shows the existence of a significant relation between corporate governance and financial performance (p=0.001), board skills and financial performance (p=0.000) and board composition and financial performance (p=0.000). This meant there existed a linear relationship between the independent and dependent variables.