Impact of Corporate Governance Mechanisms on Firm Performance in Uganda

Abstract

Purpose: The aim of the study was to assess the impact of corporate governance mechanisms on firm performance in Uganda. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The impact of corporate governance mechanisms on firm performance is a complex area of study, with various findings indicating both positive and negative effects. Overall, strong corporate governance mechanisms, including board independence, CEO duality, ownership structure, and audit quality, are generally associated with improved firm performance. These mechanisms enhance transparency, accountability, and strategic decision-making within the organization, leading to better financial outcomes, increased shareholder value, and reduced agency costs. However, the effectiveness of these mechanisms can vary depending on contextual factors such as industry dynamics, legal frameworks, and cultural norms. While some studies highlight the positive relationship between corporate governance practices and firm performance, others suggest potential limitations and the need for continuous adaptation to changing business environments. Implications to Theory, Practice and Policy: Agency theory, stewardship theory and resource dependence theory may be use to anchor future studies on assessing the impact of corporate governance mechanisms on firm performance in Uganda. Practitioners should prioritize enhancing board diversity and independence to improve governance effectiveness. Policymakers should enforce regulatory frameworks that promote transparency, accountability, and ethical behavior in corporate governance practices.