Internal Corporate Governance Mechanisms and Financial Performance of Listed Financial Institutions at the Uganda Securities Exchange

Abstract

This study examined the effect of internal corporate governance mechanisms on the financial performance of listed financial institutions on the Uganda Securities Exchange. We collected secondary data from a census of all the financial institutions from 2014 to 2023. In addition, primary data on governance and financial performance was obtained through interviews to supplement the secondary data. We employed both accounting-based (ROE) and market-based (Tobin’s Q) proxies to measure firm-financial performance. Based on the results, the agency theory fails to illustrate that the board of directors (BoDs) and the audit committee (AC) are effective in improving financial performance. However, ownership structure (OS) has a notably positive and significant effect on financial performance, highlighting the importance of different forms of ownership in a firm. Our study adds to the literature by demonstrating that the application of agency theory doesn’t have a significant effect on firm-financial performance in the Ugandan context. Moreover, it contributes to the present body of knowledge on ICGMs and firm-financial performance literature, particularly in the context of an emerging economy.