Corporate Governance and Financial Performance of Commercial Banks in Tanzania A Case of CRDB Bank - Head Office Dar es Salaam
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Date
2022-10
Authors
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Publisher
Kampala International University
Abstract
The relevance of corporate governance in banks has been recognized as a high ethical value standard guaranteeing economic health on account, that it is a structure by which corporations are directed and controlled to specify distribution of rights and responsibilities among the board, managers, shareholders and stakeholders to establish rules and procedures for decision making in a transparent manner on corporate affairs by which objectives are set and attained in monitoring performance. While the existing literature on the subject has received major concern due to ineffective corporate governance resulting from excessive misuse of power, fraud and damage that is prevalent today, this study aimed at assessing the financial benefit of banks with effective corporate governance by analyzing the relationship between corporate governance and financial performance of commercial banks in Tanzania, using the case of CRDB Bank, distinctly accredited for its substantial financial performance.
The independent variable (corporate governance) was measured on five indices (auditing, accountability, transparency, risk management and board composition structure), whereas the dependent variable (financial performance), was (return on assets and return on equity). A case of CRDB Bank-Head Office was used as the research design where quantitative research approaches were applied on a sample of 90 respondents from the bank’s Head office. Descriptive statistics, Pearson linear correlation coefficient (PLCC) and linear regression analysis were used in data analysis to test the null and alternative hypotheses of the study.
Findings revealed that there was a strong and active corporate governance practice in CRDB Bank. Furthermore, there was a strong positive significant effect of auditing, accountability, board composition structure and risk management on financial performance whereas, transparency had a strong but negative linear effect on financial performance, implying that excessive transparency may not consistently increase financial performance as it may interfere with the safety of bank confidentiality (privacy) causing information risk attacks.
The author concluded by recommending that the corporate governance analyzed in the study be utilized by the government, financial sectors, auditors, financial leaders, regulators, theorists, enforcement agencies, decision and policy-makers and other stakeholders of various firms to formulate superior corporate governance policies that ethically operate with local and international standards to minimize corporate collapse, non-compliance and intervention from Central bank to curtail liquidation, create economic growth, robust financial base, social responsibility, integrity, good reputation and long-term value. The study also suggests that further research beyond the finance industry be ventured into since corporate governance varies from industry to industry.
Description
A Dissertation Submitted to the Directorate of Postgraduate Studies and Research at Kampala International University (Kiu) in Partial Fulfillment of the Requirement for The Award Of The Degree Of Master Of Business Administration In Finance And Accounting
Keywords
Corporate Governance, Financial Performance, Commercial Banks, Tanzania, CRDB Bank