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An Empirical Investigation of the Relationship between Board Structure and Performance of Financial Institutions in Kenya

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  • Nebert Mandala
  • E. Kaijage
  • J. Aduda
  • C. Iraya

Abstract

The corporate scene has witnessed boardroom tussles and corporate collapses around the globe. The underlying thesis is that a crisis of governance is basically a crisis of board of directors. The decline in shareholders’ wealth and most of these firm failures has been linked to the board of directors. The objective of the research was to examine whether an association exists among board structure, and performance. The study hypothesized that the influence of board structure on performance is not significant. Secondary data was collected from financial institutions in Kenya for a ten-year period from 2006 to 2015. The study used both a correlational descriptive research design and cross sectional survey design. The data collected was subjected to correlation, generalised estimating equation and regression analysis. The conclusions brought out mixed findings. The results show that, board structure had independent significant influence on performance of financial institutions. Board activity operationalized as the number of meeting in a year had a strongest independent influence on performance followed by board type. The results are in support of the agency theory and the convergence-of-interests theory. The results indicate that there is an optimal number of board of director meetings that have a significant influence on performance. The number of board of directors’ meetings which optimize firm performance was found to be 11 to 15.JEL classification numbers: L25, D22Keywords: Board Structure and Firm Performance

Suggested Citation

  • Nebert Mandala & E. Kaijage & J. Aduda & C. Iraya, 2018. "An Empirical Investigation of the Relationship between Board Structure and Performance of Financial Institutions in Kenya," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 7(1), pages 1-3.
    • Handle: RePEc:spt:fininv:v:7:y:2018:i:1:f:7_1_3
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    More about this item

    Keywords

    board structure and firm performance;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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