Corporate governance in East Africa reflects varying levels of legal enforcement and context-specific governance challenges, making internal board monitoring critical for mitigating agency costs. This study examines the influence of board gender diversity, board nationality diversity, and board age profile on agency costs within East African financial institutions. Using a longitudinal dataset of 23 listed financial institutions covering 2010 to 2023, the study analyses 322 firm-year observations. Feasible Generalized Least Squares (FGLS) and Two-Stage Least Squares (2SLS) estimation techniques are employed to address heteroskedasticity, serial correlation, and potential endogeneity. The findings indicate that board gender diversity, board nationality diversity, and board age profile reduce agency costs in East African financial institutions. These results suggest that board composition plays an important role in strengthening the effectiveness of monitoring within East African financial institutions. Empirically, the study contributes by extending the corporate governance literature beyond conventional firm performance outcomes to directly examine the board’s monitoring role through agency cost measures in an underexplored emerging-market context. The findings further suggest that regulators, stock exchanges, and financial institutions may benefit from considering board composition as a governance mechanism to strengthen oversight effectiveness and improve cost-control practices within financial institutions.
Ally Adam Mshana (Thu,) studied this question.