BOARD DIVERSITY AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

Purpose: This study sought to determine the effects of board diversity on the financial performance of commercial banks in Kenya.

Design/Methodology/Approach: This study used the causal research design and targeted all the 42 commercial banks in Kenya. The study used secondary data collected from the financial statements of the commercial banks. Descriptive statistics was utilized to profile the board of directors of the target banks. Regression model was used to analyze the quantitative data and develop a predictor model for the study. The P- value was set at 0.05 i.e., P≤ 0.05.

Findings: The findings showed that age of the director (β=0.114, p=0.017), experience of the director (β=0.140, p=0.005), gender of the director (β=0.569, p=0.033), education of the director (β=0.003, p=0.949) and firm size (β=0.224, p=0.004) have a positive and significant related (β=-0.001, p=0.959) except for education of the director which had an insignificant relationship. This implies that an increase in 1 unit of aspects related to the firm relationship with financial performance of commercial banks in Kenya However, capital structure and financial performance of commercial banks in Kenya are negative and insignificantly related (β=-0.001, p=0.959).

Contribution to policy and practice: This therefore guarantees the improvement in its ratio to the total assets which improves the performance of assets positively. The board is likewise advised to incorporate the young workforce in the management by careful training, mentoring and induction of the upcoming staff in order to ensure the continuity of bank business in the unforeseeable future.

Originality/Value: Given the findings of the study especially on the negative impact of the capital structure to performance, the study recommends that the board of directors need to revise the policies of the respective banks regarding the increase and/or improvement of the Non-equity capital.