CORPORATE GOVERNANCE PRACTICES AND FINANCIAL PERFORMANCE IN BANK OF KIGALI PLC (2019-2022)

Abstract

This research is aiming generally to assess the impact of corporate governance practices on financial performance of Bank of Kigali PLC. The study presents the specified research objectives including to influence of corporate governance on financial performance in Bank of Kigali PLC ; to analyze the influence of audit quality on financial performance in Bank of Kigali PLC and to determine the influence of board independency on financial performance in Bank of Kigali PLC. The analyzed problem statement including that over the past many years in Rwanda, many banking institutions, have continuously reported losses in the results of their operations. Poor management and insufficient control are the initial banking problems those spread the world in short period of time. The lack of corporate governance system which duty is to keep the risks under control or major breakdowns within an existing corporate governance system pose threat against the success of the banking sector. Corporate governance system allows banking companies to foresee potential problems which may cause banking losses and thereby prevent or minimize any future losses. However, lack of transparency and poor disclosure practices reduce effectiveness of corporate governance mechanism. Though, global financial crisis and major corporate scandals have reinforced the merit of good corporate governance structures in enhancing firms’ performance and sustainability in the long run (Kenneth, 2018). Researcher consulted related theories including Agent Theory of Corporate governance ; Audit Quality Theory of Change and Theory of Reasoned Board Independency Action. Population is 1262 respondents as employees of Bank of Kigali in Rwanda and sample size is 304 respondents; documentation, interview and questionnaire research techniques were used during data collection, and SPSS was used during data analysis. The R2 = 0.971 and Adjusted R2 = 0.969, show the goodness of fit of the estimated model. Up to 97.1% of long-run appreciation in financial performance is influenced by changes in corporate governance ; audit quality; board independency as implemented by Bank of Kigali PLC. Therefore, the researcher can conclude by saying that the research hypotheses all were tested; verified and then they are confirmed referring to the statistical (regression analysis) findings. The variation of Spearman Coefficient correlation is between -1 and 1. Spearman Coefficient correlation is significance when it is equal or greater than 0.01. According to the research, the correlation of 0.957(95.7%) is located in the interval [0.75 - 1.00] categorized as positive and very high correlation. As the significant level is at 0.01 (1%), the p-value of 0.000 (i.e. 0.0%) is less than 1%. This leads to confirm that there is significant relationship between corporate governance practices and financial performance.