Examination of the One Third Rule on gender diversity and its impact on performance of listed firms on the Nairobi Securities Exchange
Date
2016-06
Authors
Maingi, Valentine
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
Problems of inequality are centuries old all over the world, with the oldest discussion being on the gender equality arena. Advancing gender equality in corporate governance has increasingly become the focus of many debates in the world. While a number of studies have investigated the relationship between gender diversity and firm financial performance, their conclusions are equivocal. In 2010, the Kenyan Constitution in a bid to increase gender diversity in the public organizations introduced a legislation that requires all public firms to ensure that their elected or appointed members are not more than two thirds from the same gender. Thus raises the question; is the gender diversity concept being embraced by firms and has there been a change since the law was enforced? In 2014 the CMA in a bid to increase adoption of the gender rule among listed companies, passed an enforcement requiring its members to abide to a code of conduct that emphasizes the one third rule as per the Kenyan Constitution. Thus the study aimed to determine whether the gender diversity law was being adhered to and whether gender diversity had any impact on the performance of listed firms in the NSE. The results of the study indicate that although there has been some improvement since 2007, the representation of women on Kenyan corporate boards is lower than the acceptable one third rule requirement. Only 4 firms out of the 46 firms studied adhered to the one third gender rule. The study examined the relationship between gender diversity and firm performance for the period from 2007-2014. Findings from multiple regression analysis show a positive relationship between gender diversity at board level and firm performance. The analysis indicates that an increase in women at the board level would significantly improve the firm performance. Therefore, from a financial perspective, the study advocates for the appointment and inclusion of more women on the corporate board of firms as it leads to improved performance. On a policy level, the study recommends the strengthening of the oversight regulation by the governing authorities of listed companies in Kenya to improve adoption of the gender diversity rule.
Description
Submitted in partial fulfilment of the requirements for the Degree of Master of Commerce at Strathmore University
Keywords
One Third Rule, Gender diversity, Performance, Nairobi Securities Exchange