Board diversity effects on the financial performance of small-holder coffee processors: Evidence from Kenya

Abstract

Board diversity is an emerging trend for enhancing the performance of global organizations. There is a lack of information on the effects of board diversity on agro-processing firms' financial performance, including coffee processors. The financial performance of small-holder coffee processors has declined over the past two decades. We evaluated the effect of board diversity on small-holder coffee processors' financial performance in Kenya. We used data from 41 small-holder coffee processors and a 2-stage least squares regression analysis to evaluate board diversity's effect on the processors' financial performance. Our findings showed that board age, the proportion of independent board members, and the proportion of female board members positively and significantly affected the return on assets of the small-holder coffee processors. Subsequently, coffee processors could increase female representation and independent directors on the board to improve their financial performance. The wet mills should also consider board age diversification for enhanced financial performance. Policymakers should implement measures that ensure board diversification based on gender, age, and board independence to upsurge the financial performance of small-holder coffee processors.

Keywords

• Agro-processing
• Gender diversity
• Board independence
• Board age
• Return on assets