IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v7y2023i12p1550-1556.html
   My bibliography  Save this article

Effect of Board Size and Board Share Ownership on the Financial Performance of Commercial Banks Listed at the Nairobi Securities Exchange in Kenya

Author

Listed:
  • Ivy Bach

    (Student, Kenyatta University)

  • Dr. Nathan Mwenda

    (Lecturer, Kenyatta University)

Abstract

Financial performance of commercial banks in Kenya has been deteriorating due to low investments caused by poor corporate governance practices, as reported by instances where boards of directors have refused to embrace good corporate governance practices, resulting in poor financial effectiveness. The research sought to ascertain how the board size and board share ownership affect the financial performance of commercial banks listed on the NSE during the years 2016 to 2020. A descriptive research design was adopted and was anchored on agency theory. Secondary data was obtained from the listed commercial banks published on the Kenyan Investors website, Capital Markets Authority Library, Nairobi Securities Exchange websites, and their websites. Inferential and descriptive statistics were utilized in data analysis and the Panel Data Regression Model was analyzed using Stata 16. Findings showed that the average board size for the 12 NSE-listed commercial banks in 2016 was 12, 10 in 2017, 8 in 2018, 11 in 2019 and 9 in 2020. Average board share ownership was 2.10% in 2016, 2.32% in 2017, 2.61% in 2018, 2.92% in 2019 and 3.12% in 2020. The study recommends commercial banks to have a bigger board which might have more specialized skills, well-rounded expertise, and closer supervision of upper management which would eventually lead to optimal judgments and better financial performance.

Suggested Citation

  • Ivy Bach & Dr. Nathan Mwenda, 2023. "Effect of Board Size and Board Share Ownership on the Financial Performance of Commercial Banks Listed at the Nairobi Securities Exchange in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(12), pages 1550-1556, December.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:12:p:1550-1556
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-7-issue-12/1550-1556.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/journals/ijriss/articles/effect-of-board-size-and-board-share-ownership-on-the-financial-performance-of-commercial-banks-listed-at-the-nairobi-securities-exchange-in-kenya/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Panayotis Kapopoulos & Sophia Lazaretou, 2007. "Corporate Ownership Structure and Firm Performance: evidence from Greek firms," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 144-158, March.
    2. Aebi, Vincent & Sabato, Gabriele & Schmid, Markus, 2012. "Risk management, corporate governance, and bank performance in the financial crisis," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3213-3226.
    3. Eric M. Bosire & Vincent O. Ongore, 2015. "Effects of Board Composition on Financial Performance: Empirical Analysis of Companies Listed at the Nairobi Securities Exchange," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 23-43.
    4. Dr. N.O Dibia & J.C Onwuchekwa, 2013. "An Examination Of The Audit Report Lag Of Companies Quoted In The Nigeria Stock Exchange," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 3(9), pages 8-16, July.
    5. Adams, Renée B. & Mehran, Hamid, 2012. "Bank board structure and performance: Evidence for large bank holding companies," Journal of Financial Intermediation, Elsevier, vol. 21(2), pages 243-267.
    6. Roman Horváth & Persida Spirollari, 2012. "Do the Board of Directors' Characteristics Influence Firm's Performance? The U.S. Evidence," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(4), pages 470-486.
    7. Dr. N.O Dibia & J.C Onwuchekwa, 2013. "An Examination Of The Audit Report Lag Of Companies Quoted In The Nigeria Stock Exchange," International Journal of Business and Social Research, LAR Center Press, vol. 3(9), pages 8-16, September.
    8. Xiaohui Wu & Hui Li, 2015. "Board independence and the quality of board monitoring: evidence from China," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 11(3), pages 308-328, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Owen, Ann L. & Temesvary, Judit, 2018. "The performance effects of gender diversity on bank boards," Journal of Banking & Finance, Elsevier, vol. 90(C), pages 50-63.
    2. Mollah, Sabur & Zaman, Mahbub, 2015. "Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 418-435.
    3. Laura Baselga-Pascual & Antonio Trujillo-Ponce & Emilia Vähämaa & Sami Vähämaa, 2018. "Ethical Reputation of Financial Institutions: Do Board Characteristics Matter?," Journal of Business Ethics, Springer, vol. 148(3), pages 489-510, March.
    4. Alin Marius Andries & Martin Brown, 2017. "Credit booms and busts in emerging markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(3), pages 377-437, July.
    5. Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2017. "Supervisory boards, financial crisis and bank performance: do board characteristics matter?," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(4), pages 310-337, November.
    6. Dupire, Marion & Slagmulder, Regine, 2019. "Risk governance of financial institutions: The effect of ownership structure and board independence," Finance Research Letters, Elsevier, vol. 28(C), pages 227-237.
    7. Paolo Agnese & Paolo Capuano, 2020. "Risk Governance and Performance: Evidence From Eurozone¡¯s Large Banks," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 28-41, October.
    8. Bowo Setiyono & Amine Tarazi, 2018. "Does Diversity of Bank Board Members Affect Performance and Risk? Evidence from an Emerging Market," CSR, Sustainability, Ethics & Governance, in: Belén Díaz Díaz & Samuel O. Idowu & Philip Molyneux (ed.), Corporate Governance in Banking and Investor Protection, chapter 0, pages 185-218, Springer.
    9. Sabur Mollah & M. Kabir Hassan & Omar Farooque & Asma Mobarek, 2017. "The governance, risk-taking, and performance of Islamic banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(2), pages 195-219, April.
    10. Mollah, Sabur & Liljeblom, Eva & Mobarek, Asma, 2021. "Heterogeneity in independent non-executive directors' attributes and risk-taking in large banks," Journal of Corporate Finance, Elsevier, vol. 70(C).
    11. Jayati Sarkar & Subrata Sarkar, 2018. "Bank Ownership, Board Characteristics and Performance: Evidence from Commercial Banks in India," IJFS, MDPI, vol. 6(1), pages 1-30, February.
    12. Iqbal, Jamshed & Strobl, Sascha & Vähämaa, Sami, 2015. "Corporate governance and the systemic risk of financial institutions," Journal of Economics and Business, Elsevier, vol. 82(C), pages 42-61.
    13. Rajat Deb, 2021. "YES Bank fiasco: a corporate governance failure," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 48(2), pages 181-190, June.
    14. Ramiz ur Rehman & Junrui Zhang & Muhammad Akram Naseem & Muhammad Ishfaq Ahmed & Rizwan Ali, 2021. "Board independence and Chinese banking efficiency: a moderating role of ownership restructuring," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 517-536, September.
    15. Dong, Yizhe & Girardone, Claudia & Kuo, Jing-Ming, 2017. "Governance, efficiency and risk taking in Chinese banking," The British Accounting Review, Elsevier, vol. 49(2), pages 211-229.
    16. Walter Gontarek & Yacine Belghitar, 2021. "CEO chairman controversy: evidence from the post financial crisis period," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 675-713, February.
    17. Ameni Tarchouna & Bilel Jarraya & Abdelfettah Bouri, 2022. "Do board characteristics and ownership structure matter for bank non-performing loans? Empirical evidence from US commercial banks," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(2), pages 479-518, June.
    18. mamatzakis, em, 2014. "The effect of corporate governance on the performance of US investment banks," MPRA Paper 60198, University Library of Munich, Germany.
    19. Thierno Barry & Laetitia Lepetit & Frank Strobel & Thu Tran, 2018. "Better than independent: the role of minority directors on bank boards," Working Papers hal-01937927, HAL.
    20. Ali Meftah Gerged & Mohamed Marie & Israa Elbendary, 2022. "Estimating the Risk of Financial Distress Using a Multi-Layered Governance Criterion: Insights from Middle Eastern and North African Banks," JRFM, MDPI, vol. 15(12), pages 1-22, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:7:y:2023:i:12:p:1550-1556. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://www.rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.