Board Diversity and Efficiency of Universities Registered in Kenya: The Role of Funding Sources

Abstract

The board diversity of institutions plays an integral role in minimizing uncertainty, augmenting knowledge sharing, improving resource utilization, and crafting overall institutional strategy to enhance optimal efficiency. Institutions with more heterogeneous boards are characterized by their ability to attract finances from multiple sources; hence, they are better positioned to be more efficient in their operations. The main aim of this study was to assess the role of funding sources in the association between board diversity and the efficiency of universities registered in Kenya. The study was supported by the agency theory, the human capital theory, the stewardship theory, and the theory of pecking order. The positivist research paradigm anchored the study. A census study of 75 public and private universities in Kenya was conducted using a descriptive longitudinal research approach. The descriptive statistics included calculating the counts, standard deviation, mean, minimum and maximum values, coefficient of variation, kurtosis, and skewness. The fixed effect model was used as the primary estimation technique in inferential statistics. The results established that funding sources partially mediate the association between board diversity and efficiency. The study recommends that for universities to increase efficiency, the boards must make a greater effort to support board diversity, establish the dimensions within the board diversity relevant to efficiency enhancement, and establish multiple funding sources to remain afloat in their operations.