Abstract:
The majority of studies on Board characteristics acknowledges the Board's role as a
board characteristics tool. Researchers have sought to determine the relationship
between board composition characteristics and a performance measure. This was done
in order to determine the important board composition variables and the consequences
of adding or removing some of these variables throughout the process of forming
successful boards. The objective of the study was to determine the moderating effect
of foreign ownership and the relationship between board characteristics constructs and
firm performance in Kenya. Specifically, the study sought to determine the
moderating effect of foreign ownership on board independence, board size, board
diligence, board expertise, and gender diversity on firm performance. The research
was premised on agency theory, resource dependence theory, stewardship theory and
social contract theory. The study used panel data research design, with a target
population being all the firms that were active for the period 2012-2016. Secondary
data was gathered from the information included in the Capital Markets Authority and
Nairobi Securities Exchange Hand Books as well as the yearly financial statements of
the companies. Multiple linear regression model was used to yield outputs for
hypothesis testing; in addition diagnostic tests, that is, normality, linearity,
multicollinearity, unit root, homoscedasticity and autocorrelation
and data
transformations were carried out using STATA v. 14.1. Descriptive and inferential
statistics were also obtained. Only board competence was statistically significant at a
5% level of significance in determining the performance of NSE-listed enterprises,
according to the study findings. It was also discovered that board foreign ownership
has no moderating effect on the governance and firm performance components. This
study therefore recommends a re-evaluation of members engaged at the board level
through expertise by emphasizing a considerable package for remuneration to be in
tandem with the structures of their day to day operations of the firm. Areas for further
studies should include the inclusion of the larger East African Community with
consideration of the extrinsic factors of political interference/instability and
corruption as well as other performance measures such as Tobin Q and Return on
Assets to explore the moderating effect of foreign ownership on firm performance.
