Journal of Finance and Investment Analysis

The Effect of Board Structure and CEO Tenure on Performance of Financial Institutions in Kenya

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  • Abstract

    The objective of this study was to determine whether a relationship exists among board structure, CEO tenure, and performance of financial institutions in Kenya. The study hypothesized that the influence of board structure on performance is not significant; there is no significant intervening effect of CEO tenure in the association among board structure and performance; and there is no significant joint effect of board structure and CEO tenure on performance. Secondary data was collected for a ten-year period from 2006 to 2015. Hierarchical regression analysis was performed on the variables. The results show that, overall, board structure had independent significant influence on performance of financial institutions. Board activity had a strongest independent influence on performance of financial institutions followed by board type. The findings further show that CEO tenure is not a significant intervening variable in this association; and, that board structure, and CEO tenure jointly have a significant effect on performance. The study has reduced the dearth of literature on board structure and performance and uncovered the importance of CEO tenure on this relationship. Formulation of managerial policy and practice that promote better governance practices that improve performance will be enhanced.

    JEL classification numbers: L25, D22
    Keywords: Board Structure, CEO Tenure and Firm Performance