BOARD DIVERSITY AND PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI CITY COUNTY, KENYA
BOARD DIVERSITY AND PERFORMANCE OF COMMERCIAL BANKS IN NAIROBI CITY COUNTY, KENYA
Ong’ayi Irine Kageha - Masters Student, Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Sammy Odari (Ph.D) - Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
A central governance issue is the role of boards of directors. Since boards have the ultimate responsibility for the success or failure of an organization, they must be concerned with strategy. Board composition evaluates the mix between non-executive and executive heads, the board size, and other desirable qualities like gender diversity, education of board members, nationalities, age of board members, and functional background. The study's goal was to evaluate the relationship between board diversity and performance of commercial banks in Nairobi County. The following study objectives are highlighted: To examine the association between gender diversity, board director functional background, board director independence, board director age, and commercial bank performance in Nairobi County. The following theories anchored the study: resource dependency theory, resource-based view theory, stewardship theory and agency theory and upper echelons theory. A descriptive research design was used. The study respondents were limited to top level managers of the units of analysis which comprised of Absa Bank Kenya, Equity Bank, Kenya Commercial Bank, Cooperative Bank, Standard Chartered Bank, NCBA Bank, Stanbic Bank I&M Bank and Diamond Trust Bank. The study used stratified random sampling to select the sample size. Descriptive statistics were used to analyze the data. In the data analysis, ANOVA, t-test, Pearson correlation, p-values, and coefficient of determination were employed. Tables, figures, graphs, and frequency tables were used to present data. Regression and correlation analysis were conducted to investigate the association between board diversity and performance. Based on the findings of the study, Functional Background, Age diversity, Board Members Independence and Gender diversity were found to have a strong positive relationship with the performance of tier one commercial banks in Nairobi County, Kenya. The statistically significant relationship between the two variables suggests that Functional Background, Age diversity, Board Members Independence and Gender diversity plays an important role in enhancing the performance of commercial banks in the region. Therefore, it was concluded that effective Functional Background strategies can positively impact the performance of tier one commercial banks in Nairobi County, Kenya. Further research is needed to be done on other bank tiers to compare the findings and make generalization. The study can also be replicated in other financial institutions other that commercial bank. It is equally suggested that another study be undertaken using other sectors with the same variables to determine how board diversity affects the performance.
