Effect of Board Diversity on Corporate Social Responsibility of Commercial Banks in Kenya

Abstract

The main objective of the study was to determine the effect of board diversity on corporate social responsibility of commercial banks in Kenya with specific reference on how proportion of shares held by unknown shareholders, board size, female director proportion, proportion of independent directors, bank size and bank deposits affect the financial performance of commercial banks in Kenya. The research utilized data from the 41 commercial banks operating in Kenya for a five-year period covering 2013 – 2017. The research utilized descriptive cross-sectional research design. The descriptive measures findings show that there is a large gap between the maximum and minimum value of the number of bank branches, which means that there is high variability of value of the number of bank branches. The same result was found in terms of the number of independent directors, level of bank deposits and the total assets. However, the gap existing between the number of board members and female directors, in the commercial banks in Kenya was low implying that there exists a small gap between the banks. The results of the study were also that there exist a positive correlation between number bank board composition and the undertaking of the CSR activities. The study revealed that there is a significant positive relationship between CSR and Number of bank branches (rho=0.773) though a weak negative significant relationship between CSR and Percentage of shares held by unknown shareholders was found (rho=-0.463). In addition, the findings showed that there is a strong positive significant relationship between Number of board members and CSR (rho=0.618) and also between Total bank deposit and CSR (rho=-0.652). In addition, there was a significant positive relationship between Number of independent directors on board and CSR (rho=0.216). Finally, there was a significant positive relationship between number of female directors and CSR (rho=-0.652). The research recommends that the board size ought not to be excessively vast and ought to be comprised of qualified experts who are familiar with the oversight function.