Effects Of Board Diversity On Financial Performance Of Companies Quoted On The Nairobi Securities Exchange

Abstract

This research set to determine how board diversity influences financial performance of firms listed at the NSE. All 62 organizations listed at the NSE formed population of this work. Data was obtained from 57 firms giving a response rate of 91.9% that was considered adequate for this study. Independent variable in this research was board diversity operationalized as gender diversity, age diversity and citizenship diversity. Control variables were age of a firm represented by the number of years the firm has been in existence, board size represented by the number of board members and firm size given by natural logarithm of total assets in an year. The response variable was financial performance given by return on assets. A five-year period, January 2014 and December 2018, was studied through gathering of secondary data. Descriptive research design method was employed while multiple linear regressions model was applied in analysis of the association between the variables. The data was analyzed by use of SPSS version 22. An R-Square value of 0.078 was produced from the study results which meant that 7.8% of financial performance of organizations at the Nairobi Securities Exchange can be explained by the six predictor variables as 92.2 of disparity of financial performance was related to variables that were not part of this study. Findings of ANOVA highlight how F was important at the 5% level, showing p=0.001. Henceforth, this case showed that the model was appropriate in explaining the correlations between the predictor variables and the response variable. In addition, it was revealed that gender diversity, citizenship diversity and age of a firm had a significant effect on financial performance while age diversity, board size and firm size produced positive but insignificant findings for this research work. This research recommends that strategies should be set to enhance gender diversity and citizenship diversity since these two significantly influence financial performance among firms at the NSE.