Moderating Influence of Board Diversity and Directors Compensation on Corporate Governance Structure and Financial Performance of the companies listed on the Nairobi Stock Exchange

摘要

Firms' shareholders can be protected from self interest of the directors through effective monitoring role of corporate governance mechanisms.The increasing cases of corporate scandal and failure in recent times have encouraged greater media and public interest in corporate governance than ever before and Kenya has not been spared either.The main objective of the study was to gain better understanding on how the integrated theories and extended model of corporate governance explains the relationship between corporate governance structures and financial performance of listed companies in Kenya. The data was collected using a qualitative technique of questionnaires through self administered interviews and from secondary sources of the annual reports of the firms to be studied. The results of the study suggests significant positive relationship between board composition, board diversity as well as directors' compensation and financial performance measured as ROA and ROE. Furthermore, the study indicates that audit committee was significantly negatively related to financial performance measured as ROE. However, the study found no relationship between board leadership structure and financial performance. Other than that, the findings on integrated model, which incorporated the moderating effect of board diversity and directors' compensation individually and jointly, suggest that the presence of board diversity (women) and directors' compensation individually had significant positive influence on the relationship between board composition and financial performance when measured as ROE. However, the effect of board diversity significantly interacted with the audit committee to exert negative influence on financial performance measured as ROA. Similarly, the study suggests that the presence of joint effect of board diversity and directors' compensation appears to have significantly interacted with board composition and audit committee to influence financial performance measured as ROE.