When Diversity Meets Experience: Unpacking the Tension between Board Diversity and CEO Experience in East African Listed Firms

Abstract

Corporate governance is essential for the achievement of a company’s objectives
as a way of mitigating agency problems. This study explored the influence of
board diversity on the financial performance of East African listed companies
and the moderating role of CEO Experience. Our study utilized secondary data
from the East African stock exchange markets: the Nairobi Stock Exchange, the
Dar es Salaam Stock Exchange, the Uganda Stock Exchange, and the Rwanda
Stock Exchange. Our sample included 36 listed nonfinancial companies in East
Africa, making a total of 325 observations. We employed fixed-effects regression
analysis to investigate the relationship. Our primary finding shows that board
diversity positively and significantly influences the financial performance of East
Africa-listed companies. Additional analysis reveals that a CEO with prior
experience weakens the influence of diversity on financial performance. Our
findings are robust to alternative measures of diversity. More female directors
improve the influence of diversity on financial performance. However, it should
not exceed 30 percent of the board members. This study contributes theoretically
to corporate governance literature and informs policymakers on the crucial role
of diversity on the board in East Africa