BOARD TENURE, FINANCIAL RISK MANAGEMENT AND FINANCIAL PERFORMANCE: EVIDENCE FROM NON-FINANCIAL FIRMS LISTED ON THE NAIROBI SECURITIES EXCHANGE

This study examined whether financial risk management mediates the relationship between board tenure and the financial performance of non-financial firms listed on the Nairobi Securities Exchange - Kenya. A longitudinal research design was applied to a panel of 28 firms from 2016-2024, yielding 252 firm-year observations. Board tenure was measured as the average years of service of directors; financial risk management by a composite Financial Risk Index of liquidity, leverage and asset-concentration; financial performance by return on assets and return on equity. Mediation was analysed through a hybrid within-between panel model, with year effects, firm-clustered standard errors and controls for board size, independence, gender diversity and ownership concentration. The indirect effect was tested with a 2,000-replication firm-level bootstrap. Findings indicated that board tenure is not directly associated with ROA or ROE, either within or between firms. Between firms, however, longer-serving boards carried significantly less financial risk (β = −0.0146, p = 0.007). This held in every robustness check. Firms with higher financial risk earned lower ROA (γ = −0.2967, p = 0.025). The indirect effect of tenure on ROA through financial risk was positive but not significant (a × b = 0.0043; 95% CI [−0.0006, 0.0125]). The study concluded that board tenure matters for financial risk management and financial performance among NSE-listed non-financial firms in Kenya. It is recommended that board renewal policies balance continuity andrisk oversight for better performance.