Influence of Corporate Governance on Financial Performance of Selected Listed Companies in Rwanda Stock Exchange

Benon Nuwagaba & Thomas Tarus
University of Kigali
Email: nuwagababenonm@gmail.com

Abstract: This study examines the influence of corporate governance practices, particularly board size, on the financial performance of companies listed on the Rwanda Stock Exchange (RSE), focusing on the relationship between board size and key financial indicators such as Return on Assets (ROA) and Return on Equity (ROE). Grounded in governance and financial performance theories, the research employed a descriptive research design with a quantitative approach. A longitudinal analysis was conducted, covering data from 7 companies over a 6-year period (2018-2023). Data were collected from secondary sources, including publicly available financial reports and statements, and analyzed using both descriptive and inferential statistical methods. Correlational analysis revealed a strong positive relationship between board size and financial performance, with a Pearson correlation coefficient of 0.867, indicating that larger boards tend to have a positive impact on financial outcomes. The model summary indicated a strong fit for the data, with an R-squared value of 0.856, meaning that 85.6% of the variation in financial performance could be explained by the model, highlighting the importance of governance structures. Based on these findings, the study concludes that while board size plays a significant role in corporate governance, its impact on financial performance is contingent on effective decision-making and governance practices. The study recommends that companies focus on optimizing board composition, ensuring efficient decision-making processes, and enhancing board members’ governance capabilities to improve overall financial performance.