Abstract
The main objective of this study was to examine the influence of board size on the financial performance of listed companies within the East African Community (EAC) and make recommendations on the board size that can enhance company financial performance within the EAC. The research adopted a positivist paradigm in a quantitative analysis using non-probability sampling to select forty-two listed companies listed on the EACs stock markets between 2008 and 2014. We developed our hypothesis based on secondary data from databases, company’s published annual reports, and websites. We used Microsoft excel and SPSS to generate, manage and analyses data used in the descriptive statistics, correlation, and regression outputs. Results from our regression analysis were inconclusive and hence we were unable to generalize the relationship between board size and company performance moderated by total assets and market capitalization. The descriptive statistics result suggests that the optimal board size in EAC lies between nine and ten members. We thus recommend to EAC-listed companies to adopt board size of nine directors to avoid the drawback of large boards such as limited members’ participation, lack cohesion and consensus due to widespread opinions which may deter the board from carrying out its advisory and monitoring functions. Key words: Board size, East African Community (EAC) stock markets, financial performance.
Highlights
Board size is defined as total number of directors at a specified time (Lipton and Lorsch, 1992; Yermack, 1996)
This study revealed the following statistical results on ordinary least squares (OLS) diagnostic test, descriptive statistics, correlation and regression results obtaining from testing the impact of board size on company financial performance
Return on Assets (ROA)= Return on assets, Return on Equity (ROE)= Return on equity, TBQ= Tobin‟s Q ratio, Price Earnings ratio (PER)= Price Earnings Ratio, BS = Board size, TA = Total assets, MC = Market capitalization
Summary
Board size is defined as total number of directors (both outside and executive directors) at a specified time (Lipton and Lorsch, 1992; Yermack, 1996). According to Bonn et al (2004), a large board is often more skeptical when making strategic decisions than an optimal one, which will inhibit the company‟s value maximization This makes large boards more symbolic in nature but less competent in facilitating good management practices (Hermalin and Weisbach, 1991). The EAC has four securities exchange markets (SEM‟s) domiciled within the four EAC member states each with different codes of governance and good practices that regulate their listed companies and issuers of bond instruments. These codes provide codes of conduct addressing the minimum board size, roles and responsibilities of the CEO, board committees, shareholders‟ rights to mention but a few. This was three years after the operationalization of the EAC common market
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
