| dc.description.abstract | The study sought to examine the impact of the diversified boards on the value of firms quoted in the NSE. The period covered in the study was six years between Jan 2002 to Dec 2007. Secondary data was used and was obtained from the NSE database, websites, and the prospectus of all quoted companies. Data was analyzed using the Multiple Regression Model. This helped determine the impact of diversified boards or otherwise on the value of the firm. The dependent variable was firm value and it was measured using ROE. The independent variables were board characteristics (age, gender, independence, experience, and board size).
The study found that diversified boards account for 21.2% of the variance in firm value as measured by return on equity. The correlation coefficient was 0.460 which indicates that the correlation is moderately low but positive. The study failed to establish a significant relationship between firm value and board diversity. The significance of the F statistic (sig. = 0.301) revealed that a lot of the relationship is explained by chance. The most significant board feature that affects firm value was gender followed by board size. Age was the third significant feature that affects firm value. Individually, that shows that age has a negative influence of the value of firms. Board size was also found to have a negative influence on firm value. Expertise and gender were also found to have a negative influence on firm value. However, independence has a positive influence on firm value.
The study concludes that highly diversified boards in terms of gender, age, expertise, size, and independence positively impact on the value of firms in Kenya. This evidence concurs with other studies done in other countries which found that diversified boards positively influence performance of firms. It is recommended that during the composition of board, several issues need to be looked into. The diversification parameters of size, age, gender, expertise, and independence should be carefully looked into so as to balance the board since more of some of the features may have negative impact on firm values. Independence is very important and all boards should always strive to be independent. | en |
