Board Efficacy on the Financial Performance of Banks

This book looks at the efficacy of the board of directors' characteristics on the financial performance (Return on assets) of listed commercial banks in the Nairobi Securities Exchange. It looks at director independence, financial expertise, and multiple directorships as the board characteristics, while the agency theory is used as the theoretical framework.11 listed commercial banks for the period 2009-2016 were selected using judgmental sampling, while the unit of measure is the board of directors. Panel data is used to test the board efficacy. The result is that the overall model is significant at 5% significance level with a p-value of 0.0283. The results infer that an increase in director independence leads to high financial performance. It is also inferred that a unit increase in director independence increases the return on assets by 0.0198. Lastly having more directors with financial expertise could lead to an increase in return on assets while refering to both fixed and random effects analyses by a factor of 0.246 and 0.290 respectively. This implies that having more directors with financial expertise improves the return on assets of the banks.

Autorentext

CPA. Immaculate Njeri Mwangi is a Certified Public Accountant at the Teachers Service Commission Kenya. She obtained her BBM degree from Moi University and MBA degree from the Catholic University of Eastern Africa. She has a passion for Corporate Governance and has published in the International Journal of Economics and Finance.

Klappentext

This book looks at the efficacy of the board of directors' characteristics on the financial performance (Return on assets) of listed commercial banks in the Nairobi Securities Exchange. It looks at director independence, financial expertise, and multiple directorships as the board characteristics, while the agency theory is used as the theoretical framework.11 listed commercial banks for the period 2009-2016 were selected using judgmental sampling, while the unit of measure is the board of directors. Panel data is used to test the board efficacy. The result is that the overall model is significant at 5% significance level with a p-value of 0.0283. The results infer that an increase in director independence leads to high financial performance. It is also inferred that a unit increase in director independence increases the return on assets by 0.0198. Lastly having more directors with financial expertise could lead to an increase in return on assets while refering to both fixed and random effects analyses by a factor of 0.246 and 0.290 respectively. This implies that having more directors with financial expertise improves the return on assets of the banks.