Abstract:
The primary objective of economic entities is to maximize shareholders' wealth.
Therefore, the concept of firm value is of great concern among varied stakeholders.
However, firms listed in East African Stock Exchanges (Nairobi Securities Exchange,
Uganda Securities Exchange, Dar es Salaam Securities Exchange, and Rwanda
Securities Exchange) continue to report low firm value and massive corporate
governances lapses. Therefore, the objective of this research was to examine the link
between board structure, intellectual capital, financial reporting quality, and firm
value among companies listed on East African securities exchanges. Specifically, the
study examined the effect of board structure (board size, board diversity, board
independence, and board expertise) on firm value, the moderating effect of financial
reporting quality, and the mediating effect of intellectual capital on the relationship
between board structure and firm value. The research was grounded on agency and
resource based view theories and the positivism paradigm. The study used an
explanatory research approach. Data was for the period 2012 to 2020 and was
extracted from published financial reports. After applying the inclusion and exclusion
criteria the final sample comprised of 67 firms. The choice between the fixed effect
and the random effect model was based on the Hausman test. The findings show that
while board size (β= -0.371, ρ<0.05) and board diversity (β=-0.053, ρ<0.05) had a
negative and significant effect on firm value, board independence (β=0.126, ρ<0.05)
and board expertise (β=0.393, ρ<0.05) had a positive and significant effect.
Additionally, financial reporting quality had a significant moderating effect on the
relationship between board size (β= -0.01, ρ<.05), board diversity (β= 0.02, ρ<.05),
board independence (β= -0.02, ρ<.05) and board expertise (β= 0.04, ρ<.05).
Intellectual capital had a mediating effect on the relationship between board size (β= -
0.087, ρ<.05), board diversity (β= -0.028, ρ<.05), board independence (β= 0.037,
ρ<.05), board expertise (β= 0.103 ρ<.05) and firm value. Financial reporting quality
moderated the indirect effect of intellectual capital on board independence (β= 0.011,
ρ<.05).and board expertise (β= -0.02, ρ<.05) and firm value. Thus, management of
listed firms should consider smaller and more diversified boards to enhance firm
value. Besides, there is a need for mandatory intellectual capital disclosure and
improve financial reporting quality to strengthen the effect of board structure on firm
value. Finally, future research should look at the antecedent effect of other variables
such as director tenure on firm value.
