|dc.description.abstract||This study examines the effect of board composition on firm's performance.
The focus is on all the quoted companies in Kenya for a period of ten years
starting from 1994 to December 2003.
The basic methodology involved sampling the companies that were
continuously listed in the Nairobi Stock Exchange for the entire period. The
primary data was collected using a questionnaire method. Secondary data
was also utilized. A multiple regression model was used to analyze the data
gathered. The dependent variable was the company's performance measured
by Return on equity (model l ) and Tobin's q (model 2). The independent
variables included "elements of board composition practices (board
independence, audit committee independence, CEO duality and directors
from financial institutions) and other important control variables including
firrns size, financial leverage and board size.
We find no significant relationship between firms' performance as
measured by Return on equity and board composition variables. We also
find some evidence that firm's performance measured by Tobin's q has a significant relationship with firms leverage and size. These empirical
findings suggest that, adding outside directors to the board, audit committee
independence, directors from financial institutions, CEO duality are not
performance enhancing. We also document that the most popular or
preferred board mix consists of an average of 8 members in size, 70%nonexecutives
and no CEO duality. The findings reflect that boards in Kenya are
embracing the recommendations on good corporate governance outlined by Capital Market Authority 2002.||en