CORPORATE BOARD DIVERSITY AND PROFITABILITY OF CONSTRUCTION AND ALLIED FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
CORPORATE BOARD DIVERSITY AND PROFITABILITY OF CONSTRUCTION AND ALLIED FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
Grace Ndanu Hassan - Master of Business Administration Student, Department of Accounting and Finance School of Business, Economics and Tourism, Kenyatta University, Kenya
Dr. Moses Odhiambo Aluoch (PhD) - Lecturer, Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Globally, organizations in the construction and allied industry contribute greatly to the expansion and advancement of both the building sector and society as a whole serve as key pillars for Kenya's financial system. However, numerous indexed firms at the Nairobi Securities Exchange have experienced great financial challenges in recent years because of a number of concerns regarding control, such as board diversity which often resulted in the possibility of project stalling and has led to the sequestration, reorganization, and delisting of certain firms. The goal of this investigation is to look into the connection between corporate board diversity and the profitability of construction and related companies that are listed on the NSE in Kenya. The study also evaluated the impact of board nationality, education level, age, and gender composition on the firms' profitability. The theories of Agency, stewardship and stakeholder were all used as the study's theoretical foundation. The study and data analysis was executed using a descriptive research design. The people of interest for the research was the five construction and related companies that are registered with the Nairobi Securities Exchange. There was a design of census sampling used. The Nairobi Securities Exchange's construction and affiliated companies' financial reports was a source of secondary data. Panel regression was used to evaluate the data and determine how the study variables from the years 2017 to 2023 relate to one another. Several evaluation analyses was carried out to assess the suitability of the study framework. Ethical standards was put into considerations and adhered to accordingly. Findings from the outcome noted that board age has an insignificant positive effect on the profitability of the listed firms in Kenya with the conclusion that board age does not play a critical role in enhancing the firms’ profitability. Indicatively obtained from the outcome, board gender composition has an insignificantly positive effect on the profitability of these listed firms with the conclusion drawn that the composition of the board play an insignificant role in the determination of these firms profitability. Also, unveiled by the outcome, board education significantly affects the profitability of these firms positively with the study concluding that the educational background of the board play a major role in driving profitability of these firms. Unravelled by the outcome, board nationality has a significant positive effect on the listed firms’ profitability leading to the conclusion that the nationality of the board significantly drive profitability of the listed construction and allied firms in Kenya. The recommendation is that policymakers should implement initiatives aimed at increasing the educational qualifications of board members. This could involve establishing a regulatory framework that mandates a minimum level of educational attainment for board members, particularly in fields relevant to construction and management.
