Non-Native Minority Directors in the Boardroom: How Does their Voice Matter in Dividend Decisions?

Abstract

This study examines the effect of mechanisms enabling the voice of non-native minority directors on dividend policy. Drawing on Critical Mass Theory, it investigates whether dividend policy varies with the extent of non-native minority director’s voice. The study uses data from firms listed on the Nairobi (Kenya) and Dar es Salaam (Tanzania) Stock Exchanges for the period 2014 to 2024. It employs methods of Moment Quantile Regression to estimate average dividends across different levels of dividend pay-out. Results reveal that having at least three foreign directors negatively affects dividend policy. Further, appointing a foreign board chairperson positively affects dividend policy while having a majority non-African directors or at least 30% of them positively influences dividend policy. Neither hiring at least three non-African directors nor appointing a non-African board chairperson affects dividend policy. This study is one of the few in a developing country context examining how non-native minority directors affect dividend policy using a technique capable of uncovering variation in dividend policy at different quantiles of dividend pay-out.Keywords: Dividend Policy, Critical Mass, Board Diversity, Minority Directors