Effects of Board Composition on Financial Performance: Empirical Analysis of Companies Listed at the Nairobi Securities Exchange

Eric M. Bosire and Vincent Ongore ()
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Eric M. Bosire: Accountant, (Judiciary of Kenya) Nairobi, Kenya.

International Journal of Economics and Financial Issues, 2015, vol. 5, issue 1, 23-43

Abstract: The aim of this study is to find out the effects of board composition on financial performance of firms listed at the NSE. 46 firms participated in the study which adopted a survey research design and a census. The study deduced that independent board members as a component of board composition was not actually one of the predictors of a firm's financial performance. Board size did not significantly influence firm performance, but an assessment of board size in a composite model encompassing the other components of board composition led to the conclusion that board size actually had a significant influence on the firm's financial performance. The study also established that gender diversity has a significant positive influence on financial performance of a firm. In conclusion, board composition significantly influences firm performance when this relationship is moderated by the components of firm characteristics. The study recommended for the firms to adopt smaller boards accompanied by skill, experience, technology and organizational change strategies. Gender parity in corporate board will go a long way to bring about different perspectives of viewing business performance.

Keywords: Corporate Governance; Board of Directors; Board Composition; Independent Directors; Board Size; Gender Diversity; Financial Performance (search for similar items in EconPapers)
JEL-codes: E44 G34 L25 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (14)

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