The relationship between Board Diversity and Financial Reporting Quality of Companies Listed at the Nairobi Securities Exchange in Kenya

Abstract

The goal of the paper was to establish the relationship between board diversity and the financial reporting quality of the companies listed at the Nairobi Securities Exchange (NSE) in Kenya. The target population consisted of the 61 firms that had complete data and had continually and actively traded at NSE between January 2014 and December 2018. Secondary data was used and analyzed using fixed effects regression model as the Hausman test found it consistent. The paper found that financial reporting quality was significantly predicted by the average age of directors, board gender, and board independence but insignificantly predicted by the foreign board members and board qualification. In addition, board independence negatively relates to financial reporting quality. The paper recommends the need for NSE-listed firms to consider more age and gender diversity while limiting the number of independent board members when constituting boards to improve the quality of financial reports and avert possible collapse.

Keywords: Board Diversity, Financial Reporting Quality, Nairobi Securities Exchange Listed Companies