Abstract:
Stock liquidity is an important phenomenon since stock price and trading volume
influences how the firm is seen by its partners. Nonetheless, the quantities of
organizations that experience the ill effects of money related pain have expanded
throughout the years. Despite emphasis by regulators that listed firms must practice
good corporate governance firms still encounter stock liquidity problems, as business
success depend heavily on the ability of financial managers and the stakeholders in
the execution of business operations. Thus, this research examined the effect of board
diversity on stock liquidity of firms listed at the Nairobi Securities Exchange. The
study specific objectives were to determine the effect of board nationality diversity on
stock liquidity of listed firms, establish the effect of board age diversity on stock
liquidity of listed firms, to establish the effect of board gender diversity on stock
liquidity of listed firms and to establish the effect of board education diversity on
stock liquidity of listed firms. The study was informed by Agency Theory and Upper
Echelons Theory. This study used a combination of explanatory and longitudinal
research design. The target population comprised 62 firms listed in Nairobi stock
exchange Nairobi Security Exchange. A census approach was used to select the 40
firms for the 10 years listed in NSE Kenya giving 400 firm-yearly data formed the
sample size for the period 2008-2018. The data collection instrument used was
content/document analysis guide. Both descriptive and inferential statistics were used
to analyze data. Inferential statistics are closely tied to the logic of hypothesis testing
discussed. Panel data was analyzed using random effects model (REM). Findings
showed that board gender diversity (β 3 = 0.136, p-value = 0.000 < α = 0.000) and
board education diversity (β 4 = 0.102, p-value = 0.000<α = 0.000) have a positive and
significant effect on firm stock liquidity. However, board nationality (β 1 = 0.064, p-
value = 0.116 > α = 0.05) and board age diversity (β 2 = 0.0304, p-value = 0.136 > α =0.5) have no significant effect on stock liquidity. The results showed that board
nationality diversity and board age diversity explained 30.65% variation in stock
liquidity that (R-sq=0.3065).The study concluded firms with higher board gender
diversity and board education diversity increase stock liquidity. Therefore, in order to
increase stock liquidity, it is important to include women and men in the board but in
an equal proportion, it is also extremely necessary for companies to select directors of
different educational levels in equal proportions. Additionally, the inclusion of board
members with varying levels of education and experience enhance stock liquidity.