The impact of board composition on financial performance of listed corporations in Zambia.
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Date
2023
Authors
Milupi, David E. M
Journal Title
Journal ISSN
Volume Title
Publisher
The University of Zambia
Abstract
Corporate Governance can be defined as the directing and controlling of corporations. It became popular after the collapse of several large corporations such as Enron and WorldCom. The collapse of corporations caused depositors to lose their savings, investors to lose their investments worth billions of dollars, and employees to lose jobs. Corporate governance classifies the board into four attributes, namely, board composition, board characteristics, board structure and board process. The objective of this study was to examine whether there is a relationship between board composition (board size, board independence and board gender diversity) and financial performance of listed corporations in Zambia. This research employed a descriptive study. A sample of 5 corporations out of a population of 22 listed on the Lusaka Securities Exchange (LuSE) was selected using the proportional stratified sampling technique. The period of study was from period 2008-2020. The study extracted and analyzed secondary data of annual audited financial statements and reports from respective corporations’ websites and African financials website into excel. Stata version 14.2 software was used for statistical and regression analysis. Board composition consists of three independent variables namely, board size (logBS), board independence (BI) and board gender diversity (BGD). The study adopted the random effects and fixed effects models. Results under the fixed effects model, showed a negative and significant relationship between board size and financial performance
(PPP) at 0.05, and positive and significant relationship between board independence and financial performance (CR and QR) at 0.01. On the contrary, board independence also showed a negative and significant relationship with financial performance (PPP and DTE) at 0.1 and 0.01 respectively. Board gender diversity had a positive and significant relationship with financial performance (AT) at 0.1. Firm size also had a positive and significant relationship with financial performance (IHP) at 0.01. On the other hand, firm size had a negative and significant relationship with performance (AT, PPP and DTE). Random effects model results revealed a positive and significant relationship between board independence and financial performance (RCP) at 0.05 and Board gender diversity showed a positive and significant relationship with financial performance (GM) at 0.01. Contradictory results showed board gender diversity had a negative and significant relationship with financial performance (RCP) at 0.01. Firm size recorded a positive and significant relationship with financial performance
(RCP) at 0.01. Other results showed firm size to have a negative and significant relationship with corporate financial performance (GM) at 0.01. This study indicates that board composition has a significant relationship with financial performance.
Description
Thesis of Master of Business Administration in Finance