Corporate Board of Directors’ Activities and Profitability of Agricultural Firms Listed on the Nairobi Securities Exchange, Kenya
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Date
2024-05-21
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International Academic Journal of Economics and Finance
Abstract
Growing concerns among different stakeholders about the need for increased value in companies that they own stakes in have affected not just a single company or region but also multinational corporations, giving them a worldwide reach. Most firms have been forced to liquidate in situations where there are prolonged periods of decreased profits and eventually the management loses control. The crucial socioeconomic significance played by agricultural firms is visible worldwide. However, their ability to survive is hindered by numerous barriers, which negatively impacts their profitability. The purpose of this study was to investigate how the corporate board of directors' activities affect the profitability of agricultural firms listed on the Nairobi Securities Exchange. The study's precise goals were to assess how corporate board meetings, committees, ownership, and tenure influence the profitability of agricultural firms listed on the Nairobi Securities Exchange. The study was based on four primary theories: agency theory, stewardship theory, stakeholder theory, and resource dependency theory. The study followed a causal research strategy. A data collection schedule was used to survey the six agricultural companies, to obtain information. This survey specifically targeted this small population. The acquired data underwent analysis utilizing both descriptive and inferential methodologies. The research findings were presented using tables and figures. To guarantee that ethical norms were followed, research permission from the National Commission for Science, Technology, and Innovation was required, as well as a letter of authorization from Kenyatta University. According to the study, both board meetings and board committees have a favorable and considerable impact on the profitability of agricultural firms listed on the Nairobi Securities Exchange. In addition, the study discovered that board tenure and share ownership have a positive and minimal impact on the profitability of agricultural firms listed on the Nairobi Securities Exchange. Recommendations of the study are, that the management should encourage the scheduling of regular and organized board meetings to ensure consistent oversight and strategic decision-making processes within the agricultural firms. These meetings should be properly planned to allow for thorough discussions and decision-making processes. Additionally, the study recommended that the firms should establish well-functioning board committees with members who are qualified and experienced in their respective fields of specialization. This is mostly applicable to those committees which are focused on strategic planning, finance, audit, and risk management. Further, while board share ownership and board tenure have a positive association with profitability, their insignificant effect suggests that governance efforts should not overly prioritize these factors. Instead, boards should diversify their focus to include other critical aspects such as strategic planning, risk management, and operational efficiency.
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Citation
Kieti, W. M., Aluoch, M. O. (2024). Corporate Board of Directors’ Activities and Profitability of Agricultural Firms Listed on the Nairobi Securities Exchange, Kenya. International Academic Journal of Economics and Finance, 4(2), 59-89.