Stephen Korutaro Nkundabanyanga

A model for effective board governance in Uganda's services sector firms

Purpose – The present study was carried out with the purpose of establishing a model of effective board governance in Ugandas service sector firms.Design/methodology/approach – This study is cross‐sectional. The analysis was conducted using Analysis of Moment Structures (AMOS) software on a sample of 128 service firms in Uganda. The perceived effective board governance in Uganda was measured by the perceptions of 128 respondents who are managers or directors in each of those service firms. Three confirmatory factor analysis models were tested and fitted.Findings – The three‐dimensional model of effective board governance in Uganda – consisting of control and meetings’ organization, board activity and effective communication – was determined to be the best fitting model. Evidence in support of relevant theories of board governance was adduced.Research limitations/implications – Although plenty of literature on corporate governance exists, there is scarce literature on effective board governance conceptual...

Intellectual capital in Ugandan service firms as mediator of board governance and firm performance

Purpose - – The purpose of this paper is to examine the mediating effect of intellectual capital on the relationship between board governance and perceived firm financial performance. Design/methodology/approach - – This study was cross-sectional. Analyses were by SPSS and Analysis of Moment Structure on a sample of 128 firms. Findings - – The mediated model provides support for the hypothesis that intellectual capital mediates the relationship between board governance and perceived firm performance. while the direct relationship between board governance and firm financial performance without the mediation effect of intellectual capital was found to be significant, this relationship becomes insignificant when mediation of intellectual capital is allowed. Thus, the entire effect does not only go through the main hypothesised predictor variable (board governance) but majorly also, through intellectual capital. Accordingly, the connection between board governance and firm financial performance is very much weakened by the presence of intellectual capital in the model – confirming that the presence of intellectual capital significantly acts as a conduit in the association between board governance and firm financial performance. Overall, 36 per cent of the variance in perceived firm performance is explained. the error variance being 64 per cent of perceived firm performance itself. Research limitations/implications - – The authors surveyed directors or managers of firms and although the influence of common methods variance was minimal, the non-existence of common methods bias could not be guaranteed. Although the constructs have been defined as precisely as possible by drawing upon relevant literature and theory, the measurements used may not perfectly represent all the dimensions. For example board governance concept (used here as a behavioural concept) is very much in its infancy just as intellectual capital is. Similarly the authors have employed perceived firm financial performance as proxy for firm financial performance. The implication is that the constructs used/developed can realistically only be proxies for an underlying latent phenomenon that itself is not fully measureable. Practical implications - – In considering the behavioural constructs of the board, a new integrative framework for board effectiveness is much needed as a starting point, followed by examining intellectual capital in firms whose mediating effect should formally be accounted for in the board governance – financial performance equation. Originality/value - – Results add to the conceptual improvement in board governance studies and lend considerable support for the behavioural perspective in the study of boards and their firm performance improvement potential. Using qualitative factors for intellectual capital to predict the perceived firm financial performance, this study offers a unique dimension in understanding the causes of poor financial performance. It is always a sign of a maturing discipline (like corporate governance) to examine the role of a third variable in the relationship so as to make meaningful conclusions.

Governing boards and perceived performance of secondary schools

Purpose – The purpose of this paper is to report the results of a study carried out to determine the effect of governing boards on the performance of Ugandan secondary schools. Specifically, the study investigated whether governing boards (board role performance, finance committee role performance, board size, frequency of board meetings and board finance expertise) have an effect on the perceived performance of the schools. Design/methodology/approach – This study is cross-sectional and correlational. Data were collected through a questionnaire survey of 271 schools out of which 200 responded. The data were analysed through ordinary least squares regression using Statistical Package for Social Scientists. Findings – The results suggest that board role performance, finance committee role performance, frequency of meetings and finance expertise of governing boards have a significant effect on the schools’ performance. Research limitations/implications – The authors measure some of the variables qualitative...

Lending terms, financial literacy and formal credit accessibility

Purpose - – The purpose of this paper is to investigate the relationship between commercial bank lending terms, financial literacy and access to formal credit by small and medium enterprises (SMEs). Design/methodology/approach - – In this cross-sectional study, the authors surveyed 384 business owners or managers of SMEs in Uganda. The authors applied confirmatory factor analysis to reduce the number of factors and identify the important elements that capture commercial lending terms, financial literacy and access to formal credit. The authors put forward and tested two hypotheses relating to the significance of the relationship between perceived commercial bank lending terms, financial literacy and access to formal credit using structural equation modelling with analysis of moment structures 18. Findings - – The results suggest a positive and significant relationship between perceived commercial bank lending terms, financial literacy and access to formal credit. Moreover, the ANOVA results serendipitously show that access to formal credit varies with type of business and turnover. However, collateral and loan repayment periods are not observed variables for commercial bank lending terms. The most significant observed variable for commercial bank lending terms is interest rates. This, together with financial literacy, explains 31 per cent of the variances in access to formal credit by SMEs in Uganda. Research limitations/implications - – The study is limited to the SME firms registered and operating in Kampala, Uganda and it is possible that the results are only applicable to these firms in Uganda. Nevertheless, the findings have implications to commercial banks wishing to improve the turnover of their micro-lending schemes. Practical implications - – Efforts by the stakeholders to improve financial literacy of SMEs owners and managers must be matched with favourable interest rates if access to formal credit is to be enhanced. Social implications - – The findings also have implications for governments aiming at improving access to finance to overcome income inequality problems, and also improve their growth. Originality/value - – The results provide initial evidence of the aggregate explanatory power of interest rates and financial literacy for the criterion variable, access to formal credit by SMEs.

Board governance, intellectual capital and firm performance

Purpose - – The purpose of this paper is to examine the relationship between the combined (multiplicative) effect of board governance and intellectual capital (IC) on firm performance. Design/methodology/approach - – This study is cross-sectional and follows a positivist view of testing pre-specified hypotheses. The study uses a respondent sample of 128 service firms operating in Kampala, directors or managers are the unit of enquiry. Structural equation modelling with analysis of moment structures is used for statistical modelling. Findings - – Board governance and IC make significant contributions to firm performance. However, their interaction is a significant booster to services sector firms’ performance in Uganda. Research limitations/implications - – Although an attempt is made at controlling for common method variance in particular by proactive instrument design and testing, and usage of the Harman single factor analytical technique, its influence may not have been dealt away completely owing to failure to obtain a plausible common marker variable. Well, it is meaningful to identify the significant positive multiplicative effects of board governance and IC so as uncover what is needed in service firms to improve their performance. Originality/value - – Studies explaining firm performance via board governance only and which ignored the synergistic effects of board governance and IC have often missed the reality that the performance of the firm can significantly be improved by means of leveraging IC while simultaneously calling for effective board governance.

Knowledge absorptive capacity: do all its dimensions matter for export performance of SMEs?

Purpose – The purpose of this paper is to study the relationship between knowledge absorptive capacity (KAC) of exporting SMEs in Uganda and their export performance. Design/methodology/approach – This study is correlational and cross-sectional, and adopts firm-level data collected via questionnaires from Ugandan exporting SMEs. As the authors use the sub-domains of KAC to predict export performance and therefore these sub-mains are expected to be correlated, the authors apply hierarchical regression as an appropriate tool for analysis when variance on a criterion variable is being explained by predictor variables that are correlated with each other (Pedhazur, 1997). Using this tool the authors analyze the effect of a given sub-domain after controlling for other indicators (sub-domains) of KAC; a “control” achieved by calculating the change in the adjusted R2 and the significance of this change. Findings – The authors find that only external knowledge acquisition (a dimension of potential absorptive capac...

Audit quality differences amongst audit firms in a developing economy: The case of Uganda

Purpose – The purpose of this paper is to report findings of audit quality differences amongst audit firms in a developing country. Specifically, the authors examine the assumption of marked audit quality differences amongst large audit firms (Big 4s) and the small and medium practices (SMPs). Design/methodology/approach – First, the authors develop scales for assessing perceived audit quality in the financial services sector based on qualitative data obtained from 106 audit practitioners, 31 credit analysts and 13 board members. The authors use NVivo© to analyse the 13 transcribed interviews and follow “cross-case analysis” to visualize dimensions and scales of audit quality. Then the authors use measurement scales developed and obtain quantitative data from 183 board members and top executives in the financial services sector and test for perceived audit quality differences amongst audit firms using a Mann-Whitney U test. Findings – The findings suggest that audit quality is a multi-dimensional construc...

Financial service outreach correlates

Purpose - – The purpose of this paper is to establish the relationship between managerial competence, managerial risk-taking behaviour and financial service outreach of microfinance institutions (MFIs). Design/methodology/approach - – In this cross-sectional and correlational study, the authors surveyed 52 branches of MFIs from a population of 60 branches of 20 MFIs in eastern Uganda. Two respondents, a branch manager and a senior loan officer, were the units of enquiry for each branch. The authors put forward and tested four hypotheses relating to the significance of the relationship between perceived managerial competence, risk-taking behaviour and financial service outreach using SPSS version 20. The authors established the hypothesized relationships using Pearson correlation coefficients and obtain a mediating effect of risk-taking behaviour using partial corrections and regression analysis. Findings - – The results suggest positive and significant relationships between perceived managerial competence, risk-taking behaviour and financial service outreach. However, while the direct relationship between managerial competence and financial service outreach without the mediation effect of risk-taking behaviour of managers was found to be significant, its magnitude reduces when mediation of risk-taking behaviour is allowed. Thus the entire effect does not only go through managerial competence but majorly also, through risk-taking behaviour of managers. Research limitations/implications - – This study did not control for environmental factors such as laws and regulations. As such the model may have been under fitted. Nevertheless, the study has introduced a clearer understanding that outreach performance in MFIs rests with competent managers in strategic positions operating in synergy with their risk-taking behaviour. The study informs policy makers that outreach performance of the MFIs depends on the quality of the competence managers have in addition to their risk-taking propensities. Practical implications - – Efforts by the stakeholders to improve financial service outreach must be matched with appropriate competences and risk-taking behaviour of managers. Originality/value - – The results contribute to extant literature by investigating two explanatory variables for financial service outreach and provide initial evidence of the mediating effect of intrinsic high risk-taking behaviour of managers. Results add to the conceptual improvement in risk-taking behaviour and lend considerable support for the behavioural perspective in the study of financial service outreach of MFIs.

The association between accounting standards, legal framework and the quality of financial reporting by a government ministry in Uganda

Purpose – The purpose of this study is to examine the association between accounting standards, legal framework and the quality of financial reporting by the Ministry of Water and Environment in Uganda.Design/methodology/approach – The study used a self‐administered questionnaire to survey 120 staff and stakeholders of the Ministry of the Water and Environment. Correlation analysis was employed to determine the association between accounting standards, legal framework and the quality of financial reporting.Findings – Results indicate that accounting standards and legal framework are all positively and significantly associated with the quality of financial reporting, providing evidence of the effect of accounting standards and legal framework on the quality of financial reporting in UgandaResearch limitations/implications – Scarce literature using African data means that it is not possible to compare the findings to previous research.Practical implications – The finding of an association between accounting...

Board role performance in Uganda's services sector firms

The present paper sought to confirm factors that are relevant to board role performance in Uganda and as a corollary empirically tested the relationship between individual dimensions of the model of board role performance. The study was cross-sectional and correlational and the analysis was conducted using Structural Equation Modelling (SEM) with Analysis of Moment Structures (AMOS) software on a sample of 128 service firms in Uganda. Findings indicate that a four-dimensional model of board role performance was determined to be the best fitting model for Ugandan service firms. From the results we do claim, that board role performance causes the scores observed on the measured variables of boundary spanning, effective partnership, environmental scanning and control of the organization. The measured variables are the individual dimensions of the model of board role performance. The present study provides one of the few studies that have analysed with confirmatory factor analysis (CFA) using AMOS to test board role performance measurement model and provides a benchmark for Uganda’s service firms wishing to leverage performance of their boards. However, using cross-sectional data does not allow for testing of the process aspect of the model; still, it provides evidence that the model can stand empirical tests of the four elements of the model. Additional research should examine the process aspects of board role performance and also test our model in predicting firm financial performance. The model in this paper might improve the quality of board role performance and apply to other sectors of Uganda’s firms to avert the problem of ineffective boards as evidenced by consistent firm failures in Uganda. By improving the quality of board role performance, boards will demonstrate their relevance in company direction and improvement of company value to the benefit of all stakeholders.