Corporate Governance, Risk Management and Performance of Commercial State Owned Enterprises in Uganda

Abstract

During the last three decades, the performance of commercial State Owned Enterprises in Uganda has been disappointing. Available evidence shows that CSOEs have been characterized by low returns, financial fraud, increase in leverage levels, high levels of budgetary burdens, unpaid loans, and accruing interest. This study set out to establish the relationships between corporate governance, risk management, and the performance of Commercial State-Owned Enterprises (CSOEs) in Uganda. The study's objectives were to determine the relationship between shareholding, risk management and the performance of CSOEs in Uganda, determine the relationship between board composition, risk management, and the performance of CSOEs in Uganda, and to determine the relationship between board characteristics, risk management and the performance of CSOEs in Uganda. The study adopted a longitudinal research design that involved the analysis of secondary data on corporate governance and firm performance, from 34 CSOEs while primary data was collected from 34 CSOEs to analyse risk management. Pearson correlations, random effects, and fixed effect regression analyses were used to analyse data and test the associated null hypotheses. The study established that risk management mediated the relationship between board characteristics and the performance of CSOEs where board attendance was used as a proxy of board characteristics. However, risk management did not mediate the relationship between shareholding, board composition and the performance of CSOEs. It was concluded that improving on board characteristics would improve on risk management and hence the performance of CSOEs. It was recommended that CSOEs can do this through improving on the frequency of board meetings to minimise risk and improve on firm performance.