Corporate governance and firm performance among locally listed firms in Uganda: the moderating role of audit quality

Abstract

This study aimed to evaluate the role of audit quality in moderating the relationship between Corporate Governance and firm performance of locally listed firms in Uganda using panel data from 2011 to 2021. The study was premised on five objectives, namely; to examine the effect of board independence on firm performance among locally listed firms in Uganda; to examine the effect of board size on firm performance among locally listed firms in Uganda; to explore the effect of audit committees on firm performance among locally listed firms in Uganda; to establish the effect of institutional ownership on firm performance among locally listed firms in Uganda; and to determine the role of audit quality in moderating the effect of Corporate Governance on firm performance of locally listed firms in Uganda. Holding firm size and financial leverage constant, the study used regression and moderation techniques to explore the relationship between the study variables. The study revealed that; 1) board independence has no effect on firm performance; 2) board size negatively affects firm performance; 3) audit committees positively affect firm performance; 4) institutional ownership positively influences firm performance; 5) audit quality moderates the relationship between audit committees and firm performance. The study concluded that Corporate Governance is a necessary prerequisite in improving the performance of locally listed firms in Uganda therefore recommended that firms should; prioritize alternative practices like ownership concentration over board independence to drive performance improvements, optimize board size based on strategic requirements rather than maximizing membership, optimize the functioning of these bodies by ensuring experienced, financially literate chairs and adequate resourcing, ensure institutional investor interests align to corporate strategy and also demand high quality, independent audits to improve audit committee effectiveness.