The Relationship Between Board Composition and Financial Performance of Listed Firms at the Nairobi Securities Exchange

Abstract

The main objective of this study was to establish the relationship between board composition and financial performance of listed firms at the Nairobi Securities Exchange. Specifically, this study examined board size, gender diversity, board independence and CEO duality and how they affect the financial performance of listed firms in Kenya. Firm performance was measured using Return on Assets (ROA). This study adopted a descriptive research design and data was analyzed using a multiple linear regression model. The study population was all the firms quoted at the Nairobi Securities Exchange from January 2008 to December 2012. Secondary data were collected using documentary information from the Nairobi Securities Exchange Notebook for the periods 2008 to 2012. The study found a positive relationship between board independence, board size and CEO duality and financial performance of companies listed at the NSE. However, gender diversity and the proportion of executive directors were found to negatively affect the financial performance of companies listed at the NSE.