Effect of Board Characteristics on Financial Performance of Non-financial Firms Listed at the Nairobi Securities Exchange


  • George Thuo Gatehi Department of Business and Social Sciences, Jomo Kenyatta University of Agriculture and Technology, P.O. Box 62000 – 00200, Nairobi, Kenya https://orcid.org/0000-0001-9191-3283
  • Tabitha Nasieku Department of Business and Social Sciences, Jomo Kenyatta University of Agriculture and Technology, P.O. Box 62000 – 00200, Nairobi, Kenya




The incongruence between corporate governance and financial performance has resulted in the collapse, liquidation, and diminished profitability of several corporations in Kenya. Instructively, companies have been delisted from the Kenyan bourse as a result of irregularities and failures that curtail their profitability. Specifically, audits have pointed to failures in corporate governance, which highlight the lethargy of directors in addressing agency theory conflicts. In this regard, there is a need for evaluating the impact of board characteristics on corporations listed at the Nairobi Securities Exchange (NSE). Board characteristics such as size, independence, and diversity have a significant influence on a firm’s strategic direction. Globally, numerous studies have investigated the relationship between corporate governance and financial performance. However, there is limited scholarly research to ascertain the role of individual board characteristics on listed firms’ financial performance. Thus, this study’s main objective was to determine the effect of board characteristics on the financial performance of non-financial firms listed at the NSE. A quantitative research was conducted using 26 randomly selected non-financial firms listed on the NSE. Using historical financial data from companies’ financial statements, a correlational and regression analysis was conducted using Return on Equity (ROE) as the dependent variable. Notably, diagnostic tests such as the test for multicollinearity, autocorrelation, normality tests were conducted before the Pearson’s correlation test. Importantly, the Panel Data Model was use to determine the goodness of fit, while the Panel Least Square model was used to select the appropriate model for regression analysis. The Fixed Effect Model was the most suitable model. As a result, the findings showed that board size and independence had statistically insignificant effects on the dependent variable, while board diversity (gender diversity) had a statistically significant influence on the financial performance of non-financial firms listed on the NSE.


Board Characteristics, Financial Performance, Corporate Governance


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How to Cite

Gatehi, G. T., & Nasieku, T. (2022). Effect of Board Characteristics on Financial Performance of Non-financial Firms Listed at the Nairobi Securities Exchange. Advanced Journal of Social Science, 11(1), 1–12. https://doi.org/10.21467/ajss.11.1.1-12