Board Composition and Value-added Performance in an Emerging Securities Market: Panel Evidence from Kenya

Abstract

This study investigates the role of board composition in influencing valueadded performance for firms in the Nairobi Securities Exchange (NSE) using the fixed effects panel data methodology. Using a sample of 456 firm-year observations obtained from 38 firms for the years 2003 to 2014, we find evidence that board gender diversity (β = 0.0737; p = 0.0265) and board size (β = 0.0934; p = 0.0000) positively and significantly influence value-added performance. However, board independence (β = -0.0830; p = 0.0015) is found to significantly but negatively affect value-added performance. Based on this evidence, we conclude that board gender diversity and board size are significant positive predictors of value-added performance while board independence is a pertinent negative predictor of valueadded performance. We therefore recommended that the listed firms increase their board sizes and number of women in their boards but reduce the number of nonexecutive directors if they seek to compete in the globalised markets