International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

Board Demographics and Financial Performance of Firms Listed in NSE, Kenya
Alfred Korir, Prof. Thomas Cheruiyot

Abstract
Recent global events concerning high-profile corporate failures such as Enron in the US have put back on the policy agenda and intensified debate on the efficacy of corporate governance mechanisms as a means of creating confidence in capital markets. Following the unprecedented growth of the Kenyan financial markets in the recent past, new challenges have emerged which require concerted efforts of all players in order to safeguard the integrity of the stock exchange (Mbaru, 2008). Locally, CMC holdings have been embroiled in leadership wrangles after the former chairman was ousted due to claims of overbilling of freight services. The poor corporate governance led CMC to be kicked out of the NSE by the capital markets authority. East African Portland Cement Company (EAPCC) has also been involved in irregularities and was also kicked out of NSE. In both instances, the board of directors was cited as the source of the malpractices yet they are supposed to oversee the institutions on behalf of the public. This trend of public companies engaging in malpractices is bound to lead to poor investor confidence and therefore inhibit achievement of MDG number 8 on development of global partnership for development. This paper sought to find out the role of board independence and board size on financial performance of listed companies in the NSE. The study used a descriptive survey research design and targeted all companies listed in the NSE. Questionnaires were the main data collection instruments. Data was analyzed descriptively and inferentially using SPSS version 19. The study is significant since it will provide insight into the current corporate governance problems and assist the relevant ministry to formulate policies to create confidence in our capital market. The results support the conventional wisdom that greater board independence improves firm performance. The regulatory authorities in Kenya need to strengthen the independence of board of directors by for example making it mandatory upon firms to ensure that boards of directors have sizeable representation of outside directors.

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