Board Gender Diversity and Financial Performance of Insurance Companies in Kenya (a Case of Listed Insurance Companies in Kenya

Abstract

The study's goal was to ascertain whether board diversity and financial success among Kenyan insurance underwriters are related. Specifically, the study sought to analyze the relationship existing between board diversity, firm size, leverage, firm age, sales growth and the financial performance of insurance firms in Kenya. In order to establish the association, a correlation study design was best suited for this research. The study’s target population comprised of six listed insurance firm in Kenya. The study employed secondary sources of financial data and it extracted audited data used to measure financial performance including total asset and net earnings of individual insurance companies over a ten-year period. This researcher also obtained data on the age, gender, and ethnic makeup of the corporate boards of firms under inquiry.The median, mean, standard deviation, and other descriptive statistics, as well as inferential statistics like as multiple regression, and correlation were used to assess board features. The study adopted various diagnostic tests to make sure that the assumptions of the linear regression model have not been violated. These were: Multicollinearity, autocorrelation and heteroskedasticity. Regression results showed that board diversity had a positive and insignificant effect on financial performance (β =0.478, p=0.103). Regression results showed that firm size had a favorable and significant impact on financial performance (β =11.981, p=0.000). In addition, results showed that the relationship between leverage and financial performance had a negative and substantial with a coefficient of (β =-0.007, p=0.001). Regression results showed that firm age had a positive and insignificant impact on financial performance (β =0.006, p=0.888). Regression results showed that the relationship between sales growth and financial performance was favorable and substantial (β =0.702, p=0.000). The study recommends that management on insurance firms listed in NSE to focus on leverage, firm size, sales growth since they were found to have a significant effect on the financial performance. The firm size is crucial in a company due to their market power larger firms are able to charge higher prices and hence earn higher profits. Additionally, higher profits could also be result of economies of scale and stronger negotiating power that provides larger firms more favorable financing conditions.The insurance firms managers should also aim to maintain low leverage levels in their firms. This is because high level of debt has an adverse influence on financial growth.