BOARD CHARACTERISTICS AND PROFITABILITY OF MANUFACTURING AND ALLIED FIRMS LISTED AT THE NAIROBI SECURITIES EXCHANGE, KENYA
Abstract
This study delved into the effect of board characteristics on the profitability of manufacturing and allied companies listed on the Nairobi Securities Exchange. Guided by stakeholder theory, institutional theory, and stewardship theory, the survey deployed a design that is explanatory and a census approach to unravel these complex relationships. The nine (9) listed manufacturing and allied firms were the intended populace in this investigation and secondary data gathered from audited and published yearly statements of the firms and reports published on NSE websites were gathered and analyzed using correlation analysis, panel analysis along with descriptive statistics. Data obtained was evaluated and accessed using diagrams, figures and table for drawing conclusions and recommendations from the interpreted results. Ethical standards were duly followed during this study. An examination of board independence effect on profitability was performed. The survey unraveled that board independence exerted a positive effect that is statistically significant on profitability. The effect of board activity was determined on profitability. Outcomes uncovered that board activity held a negative but statistically insignificant effect on profitability. The board size effect was also sought on profitability. The output unfolded that board size had an inverse and insignificant effect on the profitability. Further, the moderating effect of firm size on the nexus of board characteristics and profitability was analyzed. The survey unveiled that board characteristic linkage with profitability was insignificantly moderated by firm size. It was concluded that board independence is a major predictor of the NSE listed firms’ profitability in Kenya. Conclusively, board activity is not the major determinant of the firms’ profitability in Kenya. In conclusion, board size does not play a major role in determining the profitability of the firms in Kenya. It was concluded that firm size moderating role is insignificant on the nexus of board characteristics with profitability of firms in Kenya. The survey recommended that independence of the board should be increased to improve the profitability potentials of the firms in Kenya. The survey advised that board activity should be reduced to curtail the number of resources spent on the meetings held annually.
Key Words: Manufacturing and Allied Firms, Board Independence, board activity, board size, NSE
CITATION: Kariuki, C. H. M., & Ndede, F. W. S. (2024). Board characteristics and profitability of manufacturing and allied firms listed at the Nairobi Securities Exchange, Kenya. The Strategic Journal of Business & Change Management, 11 (2), 306 – 326. http://dx.doi.org/10.61426/sjbcm.v11i2.2911
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DOI: http://dx.doi.org/10.61426/sjbcm.v11i2.2911
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