Corporate Governance and Financial Performance in East Africa.

Abstract: This systematic review examines the relationship between corporate governance practices and financial performance across East African firms. Despite growing interest in governance reforms in Kenya, Uganda, Tanzania, Rwanda, and Ethiopia, empirical evidence remains fragmented and context-dependent, with limited synthesis of regional findings. The main aim of the study is to examine the impact of corporate governance practices on the financial performance of firms in the East African Region. The paper systematically reviewed 19 peer-reviewed studies published between 2014-2024 that examined governance-performance relationships in East African corporations. Using narrative synthesis methodology, the study analysed the effects of board composition, ownership structure, audit committees, and regulatory compliance on financial performance measures including return on assets (ROA), return on equity (ROE), and market valuation metrics. Results indicate positive associations between board independence and financial performance in Kenya and Uganda, with studies showing correlation coefficients ranging from 0.416 to 0.65. However, ownership concentration effects vary significantly, with family-owned enterprises demonstrating different governance dynamics compared to publicly listed companies. Foreign and institutional ownership generally correlate with improved financial discipline, while concentrated family ownership often limits transparency and performance. Audit committee effectiveness shows positive impacts in Tanzania and Uganda, though implementation challenges persist. Regulatory enforcement varies substantially across countries, with Kenya's Capital Markets Authority showing stronger compliance mechanisms than other regional regulators, limiting the overall effectiveness of governance reforms. The findings suggest that institutional context, cultural norms, and enforcement capacity significantly mediate governance-performance relationships in East Africa, requiring region-specific approaches rather than universal governance best practices. This review contributes to understanding governance effectiveness in emerging African markets and identifies critical gaps for future empirical research. The study concluded that sound corporate governance contributes positively to firm performance, particularly by enhancing transparency, accountability, and managerial discipline.

Corporate governance, financial performance, East Africa, board composition, ownership structure, emerging markets

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