Tanzanian Banking Sector: Corporate Governance

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Table of Contents

Tanzania Context
Study Goals
References

The concept of exercising corporate governance, such as enhanced firm performance, has recently been a priority policy objective in banking institutions of many developing nations. Still, it does not appear to sufficiently show itself in the Tanzanian banking sector. The reason is alarmingly growing number of commercial banks operating poorly or entirely failed in the previous decades due to leadership and management problems (Mwita & Tefurukwa, 2018). According to Lehn (2018), corporate governance concerns how a company operates. This entails achieving corporate goals and identifying risk profiles, establishing standards for corporate behavior, managing the firm’s operations within the specified risk profile, adhering to existing rules and regulations, and defending the interests of various stakeholders and depositors. According to Soud & Aypek (2020), a friendly working relationship between the management, board of directors, and other bank stakeholders will boost profits, productivity, and efficiency. As a result, corporate governance impacts the bank’s performance by ensuring that corporate values and strategic goals are established and shared with all bank stakeholders.

Tanzania Context

For several years, the corporate governance issue in Tanzania’s banking industry has received attention. Soud & Aypek (2020) mention that focusing on corporate governance is crucial, especially given how much public scrutiny the banking sector is subjected to. Many risks like negative press arise from governance management failures. The volume of commercial bank failures across the nation in the late 2000s was a warning sign that something was wrong with Tanzania’s banking system (Jilenga & Luanda, 2021, Mwita & Tefurukwa, 2018). Well-performing banks abruptly reported huge losses caused mainly by poor corporate governance procedures in their business operations.

Study Goals

Tanzanian researchers have recently looked into several elements of the connections between bank performance and corporate governance. According to Solomon (2021), the duality of the CEO board interdependence and board size has a positive and negative effect on the market performance of the commercial banks quoted on the Dar es Salaam stock exchange. The Tanzania Centre for Corporate Governance (TCCG) report states, that board structure, the board size, and board monitoring are the key influences of corporate governance in Tanzania commercial banks (123Tanzania, n.d.). These results strongly support the necessity for more empirical research on whether corporate governance affects the performance of commercial banks in Tanzania. Therefore, this study aims to determine the impact of corporate governance on the financial performance of commercial banks traded on the Dar es Salaam stock exchange. It uses the method of analyzing corporate governance with factors including CEO duality, board composition, the board size, and independent directors.

References

123Tanzania. (n.d.). Tanzania Centre for Corporate Governance. Web.

Jilenga, M. T., & Luanda, P. (2021). Factors influencing profitability of commercial banks in Tanzania: a case study of CRDB bank plc. The Economics and Finance Letters, 8(1), 61-69. Web.

Lehn, K. (2018). Corporate governance, agility, and survival. International Journal of the Economics of Business, 25(1), 65-72. Web.

Mwita, K. M., & Tefurukwa, O. (2018). The influence of leadership on employee retention in Tanzania commercial banks. Leadership, 8(2), 32-48. Web.

Solomon, S. (2021). Corporate governance and firm performance: evidence from microfinance institutions in Tanzania (Masters dissertation). The University of Dodoma. Web.

Soud, N. S., & Aypek, N. (2020). Impact of corporate governance on banks efficiency using value added approach: The case from Tanzania. International Journal of Economics, Commerce and Management, 8(12), 1-13. Web.

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Tanzanian Banking Sector: Corporate Governance

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