EFFECT OF AGE DIVERSITY OF BOARD OF DIRECTORS ON FIRM’S CAPITAL STRUCTURE AMONG LISTED FIRMS IN NAIROBI SECURITIES EXCHANGE, KENYA
Abstract
Capital structure decision is important because it influences the performance of firms. Researchers posit that the new diverse boards are critical in exercising strategic control, tougher monitoring and financial decision making. The purpose of the study is to examine the effect of age diversity of board of directors on firm’s capital structure among listed firms in Nairobi Securities Exchange. The study adopted longitudinal design. The study utilized census technique for 34 firms that are listed on the Nairobi Security Exchange (NSE) consistently for 8-year period, 2004–2012, hence giving 272 years of observations. This study utilized secondary data. Documentary guide was used to collect data. Data was analyzed using both descriptive statistical method which included mean, standard deviation and inferential statistics to test linear relationship between variables and multiple regression to test hypothesis. The study found that age (β1= 0.362, ρ<0.05) has a positive and significant effect on firm’s capital structure. The study concluded that board diversity was an important determinant of capital structure. Therefore, there was need to diversify the board of directors in terms of ethnicity and nationality so as to effectively monitor management from adopting excessive leverage. In order to add valuable and diverse expertise that domestic members do not possess, there was need to enhance national diversity.
Key Words: Board Diversity, Strategic Management
CITATION: Otiso, K. N., & Koech, N. (2024). Effect of age diversity of board of directors on firm’s capital structure among listed firms in Nairobi Securities Exchange, Kenya. The Strategic Journal of Business & Change Management, 11 (3), 138 – 150. http://dx.doi.org/10.61426/sjbcm.v11i3.3016
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i3.3016
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