Board Structure and Risk-taking in the Extractive Industry in Kenya

The purpose of this paper is to investigate the relation between board structureand firm risk-taking in a sample of 8 extractive firms listed on the NairobiSecurities Exchange (NSE). The agency theory provided the theoreticalfoundation for this study. The study adopted a descriptive research design. Itemployed a purposive sampling technique to determine the sample size ofextractive firms on the NSE from 2019-2023. The data was retrieved from annualreports of sampled firms. Further, Fixed Effect Model and Two-stage LeastSquares (2SLS) methods supported data analysis and reliability check,respectively. Using 5 years of balanced panel data, the results show that boardsize and female gender diversity are statistically significant, negatively andpositively associated with firm risk-taking (z-score), respectively. Additionally,evidence indicates that the interaction between independent directors and femalegender terms is positively related to the z-score. In contrast, the findings on therelationship between independent directors and risk-taking are considerablymixed. Besides, the study highlights practical implications for policy reforms thatrequire more extractive firms to list on stock exchanges and mandate femaleboard representation. Finally, the study offers a literature review on the linkagebetween risk-taking and board structure in the extractive industry.