Corporate Board Diversity and Profitability of Construction and Allied Firms Listed at the Nairobi Securities Exchange, Kenya.
DOI:
https://doi.org/10.55077/edithcowanjournalofstrategicmanagement.v8i1.149Keywords:
Corporate, Corporate board diversity, board education, board nationality, profitability, return on equity, Nairobi Securities Exchange, Construction and allied firmsAbstract
Construction and allied firms are central to Kenya's economic development, yet several companies listed on the Nairobi Securities Exchange (NSE) have in recent years faced serious financial distress linked to weaknesses in board oversight, including limited diversity in board composition. This study examines the relationship between corporate board diversity and the profitability of construction and allied firms listed on the NSE, focusing on four dimensions of diversity: board age, gender composition, education, and nationality. Anchored in agency, stewardship, and stakeholder theories, the study adopted a descriptive research design and a census of all five construction and allied firms listed on the NSE, drawing secondary panel data from audited annual reports for the period 2017 to 2023. Data were analysed using panel regression in STATA, following a battery of diagnostic tests for multicollinearity, normality, heteroscedasticity, autocorrelation, stationarity, and model specification. The fixed-effects model, estimated with robust standard errors, indicates that board age and board gender composition have a positive but statistically insignificant association with profitability, measured by return on equity. In contrast, board education and board nationality both exert a statistically significant, positive effect on profitability. The findings suggest that the substantive expertise and international exposure that directors bring to the boardroom matter more for firm profitability than demographic markers such as age or the numerical presence of women. The study recommends that regulators and firms prioritise minimum educational thresholds for directors and actively pursue the recruitment of internationally experienced board members, while continuing to pursue gender-inclusive governance for reasons beyond short-term profitability alone.
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