Effect of Board Characteristics on Financial Performance of Listed Firms at Nairobi Securities Exchange, Kenya
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Keywords
Board, characteristics, finance, performance, Nairobi Securities Exchange
Abstract
Financial performance of listed firms at Nairobi Securities Exchange are expected to be financially stable in order to build investors’ confidence and contribute to economic growth. The poor performance of some firms at NSE resulted to some firms being suspended from trading at the NSE. A number of firms listed at the Nairobi Securities Exchange reported losses due to liquidity and corporate governance challenges. The general purpose of this study was to determine the effect of board characteristics on financial performance of listed firms in Kenya. The study specific objectives were; to determine the effect of Board activity, Board independence, and Board financial expertise on financial performance of listed firms in Kenya. The study was guided by Agency theory and Resource dependence theory. Explanatory research design was adopted and all listed firms at NSE were targeted from 2018 to 2022. Panel data analysis was conducted using Secondary data collected from audited financial reports to test the research hypothesis. Both descriptive and inferential statistics were used in data analysis. Descriptive involved standard deviation, mean, minimum and maximum while inferential statistics involved use of correlation and regression Analysis. The study results showed that firm size (β= 0.4573; P=0.000), firm age (β= 9.0449; P=0.000), board activity (β= 0.0853; P=0.004), and board financial expertise (β= 0.0672; P=0.002) had a positive and statistically significant effect on financial performance, but board independence had a negative and statistically insignificant effect on financial performance (β= -0.0252; P=0.081). The study findings inform policy regulators, investors, managers and further researchers.
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Zippy Chepkemoi , Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Kesses, Eldoret, Kenya
Department of Accounting and Finance, School of Business and Economics, Moi University, Kenya
Collins Kapkiyai , Department of Accounting and Finance, School of Business and Economics, Moi University, P.O. Box 3900, Kesses, Eldoret, Kenya
Department of Accounting and Finance, School of Business and Economics, Moi University, Kenya
Joyce Komen, Department of Management Science & Entrepreneurship, School of Business and Economics, Moi University, P.O. Box 3900, Kesses, Eldoret, Kenya
Department of Management Science & Entrepreneurship, School of Business and Economics, Moi University, Kenya