Corporate Governance and Performance of Financial Institutions in Uganda

Abstract

This paper investigates the impact of Corporate Governance (CG) measures on financial institutions' performance. The study aimed to examine corporate governance's influence on financial institutions' performance in Uganda and determine the relationship between corporate governance and the performance of financial institutions. It also sought to provide a unified framework for understanding how these performance concepts relate to each other. The study was based on Stakeholder Theory. The research design used in this study was cross-sectional. The population of the study comprised 1,229 registered financial institutions in Uganda. Using Yamane's (1967) formula for sample size determination, a total of 400 respondents were selected. A stratified random sampling technique was employed to ensure proportional representation across different tiers of financial institutions, including commercial banks, credit institutions, Microfinance Deposit-Taking Institutions (MDIs), and Microfinance Institutions (MFIs) registered as Non-Governmental Organizations (NGOs), companies, and Savings and Credit Cooperatives (SACCOs). The findings confirmed that CG and the performance of financial institutions have a mutually supportive relationship. The Pearson correlation coefficient indicates a significant positive correlation between corporate governance and firm performance (r = .649; p < 0.01), meaning that increased corporate governance in Ugandan financial institutions is associated with positive firm performance. Based on these dimensions, the study proposes a re-conceptualization of the linkage between CG and financial institutions' performance. The study concludes that the robust performance of financial institutions is associated with well-built corporate governance structures. The study recommends that, in the current financial age, financial institutions in Uganda should prioritize key strategies aimed at enhancing growth by training staff and creating a reliable and trusted environment to attract foreign investment.