Board Independence and Company Performance in East Africa

David Namanya, Grace Musiime, Chris Muganga


Purpose: The main aim of this study was to examine influence of board independence on financial performance of listed companies in the East African Community (EAC) by examining the influence of board independence on performance of EAC’s listed companies and compare the influence of board independence on company’s financial performance before and after the operationalisation of the EAC- Common Market in 2010 to make recommendations on how board independence can enhance of hinder a company’s financial performance Design/Methodology/Approach: We adopted a positivist paradigm in a quantitative analysis using non-probability sampling to select forty-two EAC listed companies. We developed hypothesises basing on secondary data from databases (DataStream, Eikon, Mint Global Bureau Van Dijk) and company’s annual reports. SPSS was used to carry out regression diagnostic test and generate descriptive statistics, correlation, and regression results. Findings and Recommendation: Our findings indicated that to some extent board independence had a statistically significant influence on company financial performance measured by RoA, RoE, TbQ but not PeR. Secondly; we also discovered some negligible changes in board independence for most listed companies for the period before and after operationalisation of the EAC - Common Market. Based on our inconclusive statistical results and the extant literature review, we recommend that EAC listed companies adopt a code of best practice that emphasises an increase in board independence.

Keywords: Board Independence, Regional Economic Integration, Financial Performance.

DOI: 10.7176/RJFA/12-12-01

Publication date:June 30th 2021

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