December 1, 2008

Corporate Governance and the Performance of Companies Listed on the Uganda Securities Exchange


1.0  Title

The working title of this research is initially drafted as Corporate Governance and the Performance of Companies Listed on the Uganda Securities Exchange. Basically, the research will investigate how corporate governance affects the performance of listed Ugandan companies. Notable is that corporate governance structure of companies stipulates the relationship among and between management, stockholders, creditors, employees, suppliers and customers, which are all important in determining the performance of any company.

There are eleven (11) companies in sum including British American Tobacco Uganda; Bank of Baroda Uganda; Development Finance Company of Uganda Ltd; East African Breweries Limited; Jubilee Holdings Limited; Kenya Airways; New Vision Printing and Publishing Company Ltd; Stanbic Bank Uganda; Uganda Clays Limited; USE All Share Index; and New Vision Rights Issue.

2.0  Background

Corporate governance represents the principle of market value maximization which underpins the capitalism of shareholder. According to Mathiesen (2002), corporate governance is a part of economics that enables the investigation on securing or motivating effective management among industries and corporations through the employment of various mechanisms. These may come in the form of contacts, organizational structures and designs and legislations. The objective of corporate governance is mainly concentrated on the improvement of a corporation's financial performance.

Corporate governance practices are typically use in promoting transparency and accountability. As always, listed companies are required to disclose their corporate governance practices and provide explanations regarding specific deviances of the code. Ernst and Young states that the primary objective of sound corporate governance is to contribute to improved corporate performance and accountability in creating long-term shareholder value.  

In Uganda, the Code of Corporate Governance governs how listed companies should conduct their business. Corporate governance is critical for both public and private enterprises towards economic and social progress. High standards of corporate governance and ethics as well as greater interdependence between enterprises and the societies in which they operate is also becoming a critical element of success. As such, the Uganda corporate law and governance strategy aims to promote an effective framework for corporate governance in the country for the purpose of giving confidence to investors, business and other stakeholders.

3.0  Research Objectives

The main purpose of the research is to investigate how corporate governance in listed companies in Uganda contributes to the performance of the companies. The study will seek to accomplish the following specific objectives:

  • To explore the role of corporate governance in achieving organisational objectives
  • To understand the principles of corporate governance and its connection with organisational performance  
  • To evaluate the function of corporate governance in achieving economic efficiency for listed companies  

4.0  Research Questions

The research will answer the key question which is: In Ugandan context, how corporate governance impacts the performance of companies? In lieu with this, the study will answer the following research questions:

1)     How do listed companies perceive the role of corporate governance in achieving organisational objectives?

2)     How the principles of set forth in Code of Corporate Governance contribute in performance optimization of listed companies?

3)     How corporate governance contribute in achieving high levels of economic efficiency to listed companies?

5.0  Significance/Justification

This study will be a significant endeavor in establishing the correlation between corporate governance and organisational performance especially for listed companies. This study will be helpful to entrepreneurs, finance analysts, businessmen and the whole financial community in Uganda in general for this will present significant findings on the impact of corporate governance to performance. Moreover, this study will be an important contribution to a body of research concerning corporate governance and how it affects the performance of companies.     

6.0  Methodology

The research strategy that the study will utilize is the descriptive method as it intends to present facts concerning the nature and status of a situation, as it exists at the time of the study and to describe present conditions, events or systems based on the impressions or reactions of the respondents of the research (Creswell, 1994). The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study.

For this cross-sectional research design, the researcher will gather data, collate published studies from different local and foreign universities and articles from social science journals; and make a content analysis of the collected documentary and verbal material. . In addition, after all the data has been collected, the researcher shall measure the responses based from the companies' conduct of corporate governance as well as operations, practices, and performance.

The study shall use the annual report of respondent corporations as well as interviews to gather pertinent data.  Moreover, the researcher shall also use previous studies and compare it to its existing data in order to provide conclusions and competent recommendations. The secondary sources of data will come from published articles from social science journals, theses and related studies on business, organizational administration, corporate governance and corporate finance. Acquiring secondary data are more convenient to use because they are already condensed and organized. Moreover, analysis and interpretation are done more easily.

The primary source of data will come from the data acquired from the annual reports of each respondent corporation as well as interviews conducted by the researcher. The primary data frequently gives the detailed definition of terms and statistical units used in the survey. These are usually broken down into finer classifications.

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