Influence of Nationality Diversity on Financial Performance of Listed Commercial Banks in the Nairobi Stock Exchange

Abstract

This study sought to determine the influence of nationality diversity on the financial performance of commercial banks listed on the Nairobi Securities Exchange (NSE). Anchored on the Group Diversity Theory, the study emphasized the importance of heterogeneous boards in shaping strategic decisions, fostering innovation, and enhancing organizational outcomes. A descriptive research design was adopted, targeting all 12 listed commercial banks through a census approach to ensure comprehensive coverage. Secondary data was obtained from audited financial statements and corporate governance reports spanning the period 2021 to 2023. Key variables included the proportion of non-local directors on bank boards and financial performance measured using return on assets (ROA). Data was analyzed using both descriptive and inferential statistical techniques. The findings revealed a strong and significant relationship between nationality diversity and financial performance, with an R-square value of 0.900, a beta coefficient of 2.034, and a p-value of 0.001. This implies that increasing the representation of non-local directors substantially improves the financial performance of listed commercial banks. The study concludes that nationality diversity contributes positively to board effectiveness by bringing global perspectives, enhancing risk management, and strengthening corporate governance structures. It recommends that Kenyan commercial banks adopt policies that encourage the integration of both local and foreign directors, while regulators should provide guidelines on achieving an optimal balance to maximize value creation. These findings provide critical insights for policymakers, regulators, and bank executives on the strategic importance of board composition in driving sustainable financial performance.

Citation: Mwangi, L. K., Kithinji, M., & Muema, W. (2025). Influence of Nationality Diversity on Financial Performance of Listed Commercial Banks in the Nairobi Stock Exchange. Academic Journal of Humanities and Social Sciences Research, 2(1). https://doi.org/10.5281/zenodo.17119696