The effect of corporate governance on the financial performance of Commercial banks in Rwanda

Abstract

This study sought to investigate the effect of corporate governance on the financialperformance of commercial banks in Rwanda. This study examined the board size, boardcomposition, board sub-committees and board meetings and how they affect the financial performance of commercial banks in Rwanda. The firm performance was measured using the Return on Assets. This study adopted a descriptive research design to investigate the relationship between corporate governance and financial performance of commercial banks in Rwanda. The population of study was eleven commercial banks regulated by the central bank of Rwanda. The response rate was 73%of the total population which makes eight commercial banks. The secondary data were collected from the annual reports of the eight commercial banks. The data were analyzed using SPSS 20. The study found that all measures of corporate governance are not significant predictors of financial performance of commercial banks in Rwanda. The board size, board composition, the subcommittees and board meetings were found to be insignificant in explaining the profitability of commercial banks in Rwanda. Based on the findings, another study should be conducted to determine the other corporate governance variables that affect the financial performance of commercial banks in Rwanda. Financial institutions are the key engines of growth in many developing economies. The study recommends the Government of Rwanda to ensure that financial entities are operated in the interest of the depositors, the shareholders and the wider economy.Financial institutions also must conduct their activities in such a manner so as not to compromise the financial wellbeing of all its stakeholders.