EFFECTS OF BOARD COMPOSITION ON THE FINANCIAL PERFORMANCE OF RETAIL FIRMS IN KENYA

Purpose of Study: This study examined the effect of board composition on the financial performance of retail firms in Kenya. It focused on how board independence, diversity, size, and participation influence organizational financial outcomes. The study sought to address the limited empirical evidence on corporate governance practices within Kenya’s retail sector. Methodology: The study adopted a descriptive survey research design targeting employees from supermarket headquarters in Nairobi. A sample of 116 respondents was selected from a population of 163 employees, with 103 valid questionnaires analyzed. Data were collected through structured questionnaires and analyzed using descriptive statistics, Pearson correlation, and regression analysis. Findings: The findings revealed that board composition has a significant positive effect on the financial performance of retail firms in Kenya. Board composition and independence showed a strong positive correlation with financial performance (r = 0.787, p < 0.001). Regression results indicated that board composition explained 62.0% of the variation in financial performance (R² = 0.620). The study established that firms with independent, diverse, appropriately sized, and actively participating boards achieved better financial outcomes. Board diversity recorded the highest perception score, while board independence required further improvement to strengthen governance effectiveness and reduce conflicts of interest. Conclusion: The study concluded that effective board composition is a key determinant of financial performance among Kenyan retail firms. Strengthening board independence, competence, diversity, and participation can enhance governance effectiveness and improve organizational outcomes. Retail firms should prioritize transparent board appointments and continuous evaluation of board performance.