The impact of corporate governance on financial performance of financial institutions in Uganda.
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Date
2024-09-17
Authors
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Journal ISSN
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Publisher
UCU
Abstract
ABSTRACT
This study investigated the impact of corporate governance on the financial performance of
financial institutions, focusing specifically on DFCU Bank's Mukono branch and Kireka branch.
The primary objective is to explore how various dimensions of corporate governance including
board composition, board independence, and accountability affect critical financial performance
indicators such as profitability, liquidity, and asset quality. The specific objectives of the study
are to examine the relationship between board composition and financial performance, board
independence and financial performance, and accountability and financial performance of
commercial banks.
The study employed a cross-sectional, correlation, and regression research design to examine
data and determine the strength of the relationship between the study variables. A mixedmethods approach was used and the research combines quantitative data analysis with qualitative
insights gathered from key stakeholders within the bank. Both branches had a population size of
35 employees from which a sample size of 30 respondents was selected for the study. The
sampling method used included simple random and purposive sampling and data was collected
using questionnaires. The data was later analyzed using descriptive, correlation, and regression
analyses.
The findings indicated a positive correlation between corporate governance practices and
financial performance at DFCU Bank. The study revealed that board composition has a strong
positive relationship (0.453) with financial performance. An independent board weakly but
positively impacts the financial performance of commercial banks with a correlation of (0.289)
using Pearson’s correlation. The study also indicated a positive relationship of (0.420) between
accountability and financial performance.
The study concludes with actionable recommendations aimed at strengthening corporate
governance practices at DFCU Bank. It emphasizes the necessity of enhanced boards, good
accountability practices, and promotion of board independence to ensure alignment with
international standards.