Available Online: http://saspjournals.com/sjebm 822 Scholars Journal of Economics, Business and Management e-ISSN 2348-5302 Sch J Econ Bus Manag, 2017; 4(11):822-827 p-ISSN 2348-8875 © SAS Publishers (Scholars Academic and Scientific Publishers) (An International Publisher for Academic and Scientific Resources) Board Composition and Value-Added Performance in an Emerging Securities Market: Panel Evidence from Kenya Patrick Nyatete Kenyanya, Dr. Benjamin Ombok, Dr. Robert Kisavi Mule Department of Accounting and Finance, Maseno University, Kenya *Corresponding author Patrick Nyatete Kenyanya Article History Received: 10.11.2017 Accepted: 18.11.2017 Published: 30.11.2017 DOI: 10.21276/sjebm.2017.4.11.10 Abstract: This study investigates the role of board composition in influencing value- added performance for firms in the Nairobi Securities Exchange (NSE) using the fixed effects panel data methodology. Using a sample of 456 firm-year observations obtained from 38 firms for the years 2003 to 2014, we find evidence that board gender diversity (β = 0.0737; p = 0.0265) and board size (β = 0.0934; p = 0.0000) positively and significantly influence value-added performance. However, board independence (β = -0.0830; p = 0.0015) is found to significantly but negatively affect value-added performance. Based on this evidence, we conclude that board gender diversity and board size are significant positive predictors of value-added performance while board independence is a pertinent negative predictor of value- added performance. We therefore recommended that the listed firms increase their board sizes and number of women in their boards but reduce the number of non- executive directors if they seek to compete in the globalised markets. Keywords: Board Composition, Value-added Performance, Panel Data, Nairobi Securities Exchange. INTRODUCTION The Nairobi Securities Exchange is the single major open capital market in Kenya from which listed firms gain access to long-term finance [1] with the listed firms contributing about 26% of gross domestic product (GDP) in 2013 alone [2]. Increased local and foreign investments have made the bourse to grow in terms of market capitalisation from KES 700.99 billion in December 2003 to KES 1921.61 billion in December 2014 representing an annual average growth of 17.4% during the twelve years. This increase is attributed to the increase in the number of listed firms from 50 to 66 in the same period [3]. Despite the important contribution to Kenya’s GDP, financial performance of the listed firms has generally remained poor [4]. For example, during the period 2003 to 2014, Unilever Tea (K) Ltd, Access Kenya, CMC Holdings, BOC, Carbacid, Uchumi, A. Baumann, Rea Vipingo and Hutchings Biemer were either delisted or suspended from the bourse [3], representing 21.4% of initially listed firms. This indicates poor value addition. Globally, the focus of management of firms is gradually shifting from profit generation to value addition [5] since firms that are value-added oriented have been shown to be more competitive [6]. The need to understand value-added financial performance drivers has therefore been enhanced especially for firms in developing countries like Kenya which seek to compete in the increasingly competitive business world. Moreover, firms in emerging markets such as the Nairobi Securities Exchange (NSE) face challenges of increased debt levels, declining profits, unregulated board compositions and a stifling economic environment, all which threaten value addition [2]. Additionally, the firms are relatively small and less diversified as compared to those in the developed economies which exposes them to shocks emanating from uncertainty of policy and macroeconomic environment. Prior research has shown that value addition depends on both macro-economic factors such as firm industry and firm specific factors such as board composition and financial leverage. Board composition refers to the mechanism instituted by firms to achieve a balance and a mix of skills in the highest management body of the firm which seeks to ensure efficiency and effectiveness of the monitoring function of the board over a company’s top management [7]. In recent years, firms the world over have been pressured by institutional investors and shareholders to appoint directors with different backgrounds and expertise under the assumption that greater diversity in board composition leads to less insular decision-making and improved financial performance. In Kenya, the Capital Markets Authority (CMA) Guidelines on corporate governance practices by listed companies direct that boards of the listed firms should compose effective and all-inclusive independent