Effect of Two-tier Board Structure on the Financial Performance of Listed Firms at Nairobi Securities Exchange

Abstract

The study investigated the effect of a two-tier board structure on the financial performance of all 63 companies in the Nairobi securities exchange. The study considered board diversity, board independence, and board size as the independent variables of the study and financial performance as the dependent variable. The research design adopted in the study was a descriptive cross-sectional approach focused on the firms listed between 2001 and 2021. The study utilized secondary data that was sourced from the annual financial reports of the NSElisted companies. Moreover, the research also used primary data from respondents from NSElisted companies. The study used a regression analysis to estimate the relationship between the study's main variables. The study found that board diversity, the board size, and board independence had a statistically insignificant relationship with the financial performance of the NSE-listed firms. The study's findings also show that board diversity, independence, and size have a weak correlation with the financial performance of firms listed in the NSE. Generally, the research findings conclude that the two-tier board structure has an insignificant relationship with the financial performance of the companies listed in the NSE. The research recommends using other variables that affect the financial performance of the listed companies apart from the twotier board structure because it has a statistically insignificant effect on the performance of the listed companies. Moreover, future research may look at other board characteristics and other measures of performance to evaluate whether there is a positive or a negative relationship.