Does Board Accountability Influence non-performing loans of commercial banks? Empirical Evidence from Commercial Banks in Western Uganda

Non-performing loans have been an issue that affects the performance of commercial banks across the globe. Using Agency theory to examine the influence of board accountability and Non-performing Loans of commercial banks in Western Uganda. A mixed method approach (Quantitative supported by Qualitative) was adopted. A sample of 232 respondents was drawn from a population of 550 people using stratified, purposive, and simple random sampling approaches. 195 respondents were responsive from 3 commercial banks which yielded an 84.1% response rate. The hypotheses were tested and revealed significant positive associations between the study variables. 6 participants were purposively selected from 3 commercial banks and interviewed using interview guides. Using Nvivo software approaches, interview data was managed and analyzed which revealed that the respondents understood corporate governance practices and non-performing loans in terms of the Extent of board interference in loan processes and the board’s role in solving NPL issues. They concluded that having in place a well-established board of directors who are responsible and accountable to their duties and responsibilities is key in fighting non-performing loans of commercial banks and commercial banks should be very sensitive when instituting boards by selecting board members who can perform their duties with high level of integrity. This will reduce the level of board members involved and influence the loan processes by favouring themselves and their close friends and relatives which at times brings non-performing loans However, further studies should be conducted using factors that affect NPL where possible to tap salient issues from the respondents. Keywords: Board Accountability, Non-performing Loans (NPL), Commercial Banks, Corporate Governance, Loan Processes