Board Characteristics and Profitability of Tier III Commercial Banks in Kenya
| dc.contributor.author | Muigai, Francis Ngugi | |
| dc.date.accessioned | 2026-02-09T07:10:47Z | |
| dc.date.available | 2026-02-09T07:10:47Z | |
| dc.date.issued | 2025-10 | |
| dc.description | A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Business Administration (Finance) of Kenyatta University, October 2025. Supervisor Moses Odhiambo Aluoch | |
| dc.description.abstract | Tier III commercial banks in Kenya continue to experience persistent profitability challenges, reflected in their lower average Return on Assets compared to Tier I and II banks, despite their vital contribution to financial inclusion and economic growth. These challenges raise concerns about operational efficiency, governance effectiveness, and long-term sustainability. The study examined the influence of board characteristics on the profitability of Tier III commercial banks in Kenya, focusing on board independence, gender diversity, board size, audit committee effectiveness, and directors’ educational qualifications. The target population comprised all 23 Tier III commercial banks licensed by the Central Bank of Kenya between 2018 and 2023. Data was collected from the final reports for the period of the study. Various diagnostic tests were performed. The study was anchored in the Agency Theory, Resource Dependence theory, Organizational theory, Efficient Market Hypothesis, Human Capital Theory, and Stakeholder Theory. The study employed a quantitative research design using descriptive statistics, correlation, and multiple regression analysis. The study followed all the ethical considerations. Findings indicated that board independence, gender diversity audit committee effectiveness and educational qualifications had significant positive effects on profitability, while board size showed no significant influence. These results corroborate previous evidence that effective governance mechanisms enhance financial performance in smaller banks. Conclusions drawn per objective revealed that independent directors improve oversight and reduce managerial opportunism, gender-diverse boards strengthen ethical and strategic decision-making, and competent audit committees enhance financial transparency and compliance. Educational qualifications of directors also promote sound governance, while overly large boards may reduce efficiency. The study recommends that the Central Bank of Kenya strengthen enforcement of governance standards promoting board independence, diversity, and audit professionalism in Tier III banks. Further research should explore emerging determinants of profitability, including digital transformation, corporate social responsibility, and environmental, social, and governance practices, to extend understanding of governance-performance dynamics in Kenya’s small and medium-sized financial institutions. | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/32313 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Board Characteristics and Profitability of Tier III Commercial Banks in Kenya | |
| dc.type | Article |