Relationship between board committees and financial performance of companies listed at the Nairobi stock exchange
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Date
2008Author
Kituku, Benjamin M
Type
ThesisLanguage
enMetadata
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This study sought to analyze board committees In terms of their size, composition,
structure and diversity (gender and ethnic) and the effect this has on firm financial
performance. The study hypothesized that there is a positive relationship between board
committees' characteristics and financial performance of firms listed at the NSE. In
achieving the above objective, the study applied secondary data obtained from the
audited financial statements of the listed firms for the period 2002-2006. Data were
obtained from the Research Department at the Capital Markets Authority. A multiple
regression model was applied in determining the nature of relationship between firm
performance and characteristics of board committees.
The study has established that non executive directors and presence of several board
committees has an effect on firm-level financial performance. This implies that properly
constituted board committees with the right mix of non executive directors tend to
contribute more to performance than boards with a predominance of inside directors.
Ethnic diversity of board committees also enhances firm profitability and market
fundamentals. Membership on board committees provides a more accurate picture of
each director's role on the board which should lead to a more accurate test of the
relationship between board composition and board effectiveness. The study recommends
that further research should be conducted with the view of performing inter-sectoral
comparison across various market segments. Further research may also incorporate other
fundamental characteristics of board committee's members such as age diversity and
skills diversity within the research model.
Citation
Masters of business administrationSponsorhip
University of NairobiPublisher
School of business,University of Nairobi