Board Characteristics and The Financial Performance of Agricultural Firms Listed in The Nairobi Securities Exchange, Kenya

Abstract

Agricultural sector can be classified as the engine of the non-agricultural economy, which is inclusive of manufacturing, by way of provision of inputs and markets for non-agricultural operations that includes infrastructure, education, tourism and other social services. In spite of inputs of this sector into the Kenyan economy, agricultural firms listed in the NSE are only six and still these ones have been registering declining performance. The poor performance poses threat to the sector and raises questions on how the companies are managed. The study therefore endeavored to ascertain the board characteristics adopted by the listed agricultural firm and how they impacted their financial performance. Pointedly, the paper work would demonstrate the board size effect, its independence, directors’ education level and board diversity on the NSE listed agricultural firm’s performance. The theories underpinning the study were agency, resource based, stewardship and stakeholder theories. Causal research6design was also adopted and6the population study entailed the six firms relating to agricultural sector listed at the NSE. The necessary information and Data was procured from the Nairobi Securities Exchange covering six years (2016 – 2021). Using the Karl Pearson correlation and multiple linear regressions, the data6analysis6was6done and also using descriptive6and inferential statistics. Rights, freedom, security of the participants and confidentiality were preserved in this study. The conclusive results indicated agricultural firms with larger board sizes never outperformed those with smaller board sizes. Board independence impacted significantly and favourably on the financial performance of the agricultural enterprises. This was to mean that the bigger the number of independent directors, the better the performance as compared to those with a lower ratio. The findings also indicated that agricultural enterprises’ financial performance is positively and significantly impacted by the board diversity implying that performance would increase if there were more female directors in the firms. The directors’ educational background was also found to have a positive and significant impact on the firms’ financial success. This translated to supporting a higher number of professional directors in an agricultural firm for better financial performance. Therefore, the conclusion was that the performance of Kenya's listed agricultural enterprises is highly influenced by the board's features.