Abstract:
In Kenya the number of corporations going into receivership and others collapsing
remains in dilemma. The general objective of the study was to establish the
moderating effect of Chief executive officers’ power on relationship between board
structure and financial performance of listed firms in Nairobi Securities Exchange.
This study made use of two theories namely; agency theory and stewardship theory.
An exploratory research design was used in this study. The target population
consisted of 68 companies for the period 2006- 2015. The research employed both
descriptive statistics and inferential statistics. The sample size was 58 firms which
were listed for the entire period of study and had complete data. The study used
secondary data which was obtained from financial annual reports and NSE bulletins.
Data was analyzed using both descriptive and inferential statistics. Specifically,
multiple regression was used to test the hypotheses. The results showed that financial
expertise of the board was positive and significantly related with financial
performance (=1.831; <0. 005). Board independence was also found to be positively
and significantly related with financial performance of listed firms in Kenya
(=2.602; p<0. 005). Further the results showed that CEO power had a positive and
significant moderation effects on board age ( 2.582; p<0. 005) board independence
= 2.681; p < 0. 05 and financial expertise ( = 2.874; p < 0.05). The results provide
evidence on new theoretical insight into factors influencing financial performance by
incorporating the role of CEO Power. This study adds value on the understanding of
the effect of board diversity on financial performance in listed firms and how CEO
power influences this relationship in decision making in the context of a developing
economy country like Kenya, where CEO power is more superficial due to the
ownership structure and the role of family and founders in firm management. The
findings of this study will provide a basis for further studies on board diversity and
financial performance. Furthermore, the study provides empirical evidence which will
be used by the policy makers with regard to board corporate governance of listed
firms. The study recommends that the board should employ independent directors as
they are found to effectively exercise their mandate.