The effect of board profile on financial performance of the firms listed at the Nairobi securities exchange

Abstract

This study sought to establish the relationship between Board profile and financial performance of companies listed in the NSE. Specifically, it sought establish the effect of corporate governance on the financial performance of the firms listed at the NSE between 2008-2014 with emphasis on board profile. These characteristics of board were size, remuneration and independence. In order to achieve the established objective, the study adopted a descriptive study design. It was a census study in that all the companies listed in Nairobi Securities Exchange were studied. Secondary data obtained from the financial statement of the companies listed at the Nairobi Securities Exchange between 2008 and 2014 was used. Linear regression was used to describe the data and make inferences on the basis of the study result. It was found out that although the relationship between financial performance and the board size was positive, it was not statistically significant, In addition the relationship between financial performance and board of director’s indepedence was not significant. Moreover, there was a negative and significant relationship between the remuneration of the board of directors and performance. This study recommends that the country need to strengthen policies to improve firm-level corporate governance in order to bolster financial performance and attract such investors. The regulatory authorities in Kenya need to strengthen the independence of board of directors by making it mandatory upon firms to ensure that boards of directors have sizeable representation of outside directors, as is the practice in other countries, and since the evidence from this study suggest the need for this.