The Small-Scale Coffee Processors’ Financial Performance Effects of Board Diversity

Evidence from Kenya

Abstract

Board diversity is an emerging trend for improving the performance of global organizations. There is little research on the effects of board diversity on performance of agro-processing firms, including small-scale coffee processors. Over the past two decades, financial performance of small-scale coffee wet mills has been on the declining trend. We assessed the effect of board diversity on small-scale coffee mills’ financial performance in Kenya. We utilized data obtained from 41 small-scale coffee wet mills and a 2-stage least squares regression analysis to assess the effect of board diversity on the processors' financial performance. Our findings revealed that board age, proportion of independent board members, and the proportion of female board members positively influenced the return on assets of the small-scale coffee processors. Therefore, the coffee processors could increase number of female directors and independent directors on the board to enhance their financial performance. The wet mills should also diversify the board in terms of age of board members, for improved financial performance. Policymakers should introduce measures that ensure diversification of the board based on gender, age, and board independence to upsurge the small-scale coffee processors’ financial performance.