The effect of Board Composition on Capital Structure among listed firms in Kenya


  • Ednah Tanui
  • Joel Tenai


Purpose: The study sought to establish the effect of board composition on capital structure among listed firms in Kenya.

Material/methods: The study adopted an explanatory research design. The target population for the study was 60 companies listed on the Nairobi securities exchange. The study analyzed data for six years between 2007 and 2012 drawn from a sample of 34 companies.

Findings: The findings indicated that non-executive directors had a negative and significant effect on capital structure. Thus, a higher number of non-executive directors will have low gearing levels. Also, board tenure significantly affects the capital structure, this implies that increasing or decreasing board tenure has an effect on capital structure.

Value: The presence of non-executive directors improves the firm’s reputation hence making more profits which is the major concern of shareholders. Further, as directors acquire firm-specific knowledge early in their tenure, the result is better firm performance. Eventually, as tenure continues to advance, boards lose their oversight and firms engage in the more value-destroying activity.