Corporate Board Structure And Financial Performance Of Companies Listed At Nairobi Security Exchange

Abstract

Latest universal dealings vis-à-vis eminent and conspicuous business letdowns, case in point the placement of Uchumi under receivership in 2006 and eventual delisting from the NSE stagnated the strategy program and exaggerated deliberation on the ability of corporate authority contrivances as a scheme of swelling syndicate monetary output. Against this background, the study set out to investigate the likely affiliation between corporate board structure and monetary realization of businesses enumerated at Nairobi Security Exchange. More specifically, the study sought to examine the effect of board independence; board size; CEO Duality and Board Tenure on financial performance of companies listed at Nairobi Security Exchange. This study took a causal research design approach with a census of all the 63 companies listed at the Nairobi Securities Exchange. The study used secondary data sources available at the companies’ financial statements from the Nairobi Stock Exchange/Capital Market Authority for 5 years from 2008 to 2012. Two techniques of facts scrutiny were thus employed to empower the scholar accomplish a broad enquiry, namely descriptive and inferential statistics. Whereas descriptive statistics described the relevant aspects of corporate governance, inferential statistics articulate the statistical association thereof. Inferential statistics revealed a strong and positive relationship between board independence and financial performance of NSE listed companies. Both correlation and regression analyses revealed a negative relationship between board size and financial performance thereof, hence the larger the board size, the lower the financial performance. The relationship is however not statistically significant. On the effects of CEO duality on the monetarist performance of itemized companies, a positive relationship was established from inferential statistics on between CEO duality on the financial performance. Like board size however, the relationship is not statistically significant. Board tenure further strongly and significantly impacts on financial performance of NSE listed companies.