THE EFFECTS OF BOARD STRUCTURE ON THE FIRM FINANCIAL PERFORMANCE OF TANZANIAN LISTED FIRMS

Board of Directors; Board structure; Firm Performance

Abstract

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