Abstract:
With the growing competition of globalization, strategic decision makers have
been faced with the competing interests of external and internal stakeholders such
as greater diversity in corporate governance and maximizing financial
performance. The objective of this study was to determine the effect of board
characteristics on financial performance among Deposit Taking Microfinance
Institutions (DTMFI`s) in Nairobi County. This study focused on board
characteristics: the board size, board terms, board committees and board
remuneration. The target populations were the board members of the nine
DTMFI`s in Nairobi. A census was taken since the target population was
considered small and therefore the sample size was 63. The study involved
collection of primary data .The data was collected using structured questionnaire
on the basis of the objectives of study. The data collected was analyzed using
qualitative methods to yield descriptive statistics (percentages, mean and standard
deviations) and quantitative data was analyzed using statistical data analysis
techniques; correlation, ANOVA and multiple regression to test the effects of
board characteristics on financial performance among the Deposit Taking
Microfinance Institutions in Nairobi County. Results were presented in tables.
Findings from correlation analysis indicated medium and positive correlation
between board committees and board remuneration. The results on coefficient of
regression equation revealed that all the variables were making statistically
significant unique contribution to the prediction of financial performance where
the board size (t=2.729; p< 0.05), board tenure/term (t= 3.778; p<0.05), number
of board committees (t=2.217; p<0.05) and board remuneration (t=2.182; p<0.05).
Board tenure/term`s had the biggest beta value of -0.300 and therefore it made the
strongest unique contribution in explaining financial performance when variance
explained by all other variables in the model were controlled for. These results
indicated that deposit taking microfinance institutions in Nairobi County can
improve their financial performance by improving on the board characteristics to
make monitoring more effective. Further research needs to be carried out to
establish the challenges facing all microfinance institution in the whole country.
