This is a peer-reviewed, post-print (final draft post-refereeing) version of the following published document, Assenga, Modest and Aly, Doaa A and Hussainey, Khaled (2018) The impact of board characteristics on the financial performance of Tanzanian firms.

This study investigates the impact of board characteristics on the financial performance of listed Tanzanian firms. The study uses two theories of corporate governance to test the hypothesised relationships between board characteristics and financial performance. These are: namely, agency theory; and resource dependence theory and are complemented through the use of a stewardship theory. The study seeks to investigate the impact of the following variables on financial performance i) independent outside directors; ii) board size; iii) CEO duality; and iv) the board diversity aspects of gender, foreign directors and board skill. The study uses a mixed methods approach and applies a convergent parallel design (Creswell & Plano Clark, 2011), collecting quantitative data from annual reports and qualitative data from semi-structured interviews with 12 key stakeholders in corporate governance. Quantitatively, the study examines the balanced panel data of 80 firm-years observations (2006-2013) from the annual reports of 10 Tanzanian listed firms. The findings partially support agency theory since CEO duality was related with a reduction in financial performance. However, the findings do not support a relationship between the proportion of outside directors on boards and financial performance. The study provides some support for aspects of resource dependence theory, since the findings suggest that there is a positive link between gender diversity and financial performance. However, board size, board skill and foreign directors were not found to have a significant impact on financial performance. Furthermore, the interview findings provide some explanations of the relationships between board characteristics and financial performance by suggesting that the impact depends largely on the independence and proficiency of the individual directors on a firm’s board. The study contributes to the understanding of relationships between board characteristics and financial performance. The study uses, for the first time in this kind of research, Tanzanian data and the underutilised approach of mixed methods to corporate governance research. The study provides academic evidence for Tanzanian policy makers in relation to current and future governance reforms.

This study investigates the impact of foreign directors on the financial performance of the Tanzanian listed firms. The study applies balanced panel data Ordinary Least Square (OLS) regression analysis on 120 firm-years observations obtained from the firms’ audited annual reports and from the OSIRIS database from 2006 to 2018. The study findings support agency and resource dependence theories that foreign directors have a positive relationship with the firms’ financial performance. The findings indicate further that foreign directors enhance firm performance by providing the firm’s Board of Directors with effective and efficient overseeing and advice to the CEO and the top management. This study contributes to the understanding of the impact of foreign directors on firm performance and provides researched based evidence to Tanzanian policy makers on the importance of foreign members on the firm’s Board of Directors. Unlike the previous corporate governance studies, which focused on developed countries, this study examines the effects of foreign members on the Boards of Directors of listed firms in Tanzania, a developing country where very few corporate governance studies have been conducted. The study recommends policy makers in Tanzania to use the results of this original study while preparing or reviewing Corporate Governance Regulations.

This paper examines the effects of the board structure variables of board size, outside directors and CEO duality on firm financial performance of the listed firms in Tanzania. This study uses a sample of listed Tanzanian firms from 2006 to 2018 and uses balanced panel data Ordinary Least Square (OLS) regression analysis of 120 firms-year observations obtained from the firms’ audited annual reports and the OSIRIS database. Furthermore, in order to address the endogeneity problem, this study uses the Random effect regression model and the Two Stage Least Square (2SLS) regression model as a robustness test. The results show that the smaller the board size with a higher proportion of outside directors and no CEO duality, the greater the firm’s financial performance. This study contributes to the understanding of the relationship between board structure and financial performance and it provides academic evidence to Tanzanian policy makers of current and future Corporate Governance reforms. First, dissimilar to most previous Corporate Governance literature that relates to developed countries, this study examines the effects of the board structure variables of board size, outside directors and CEO duality in Tanzania which is a developing country where very few Corporate Governance research studies have been conducted. It addresses the endogeneity problems between board structure and firm financial performance using Random effect regression and Two Stage Least Square (2SLS) regression models