Corporate governance, risk management practices, and financial decision-making quality in Teso sub-region local governments (eastern Uganda)

Abstract

The study examined how risk management practices influence the link between corporate governance and the quality of financial decision-making in Local Governments within Uganda’s Teso sub-region, drawing on Agency and Contingency Theory. Specifically, the study examined the relationship of corporate governance and financial decision-making quality; assessed the relationship between corporate governance and risk management practices; determined the relationship between risk management practices and financial decision-making quality; and established the mediating effect of risk management practices in the relationship between corporate governance and financial decision-making quality. A cross-sectional research design was used and a quantitative approach. A population target of 154 LGs was considered with a sample of 111 LGs was selected. Stratified sampling technique was used. 94 LGs participated in the study which represents 85% response rate. The study used structured questionnaires and data was pretested for reliability and validity. This was done with content validity index (CVI) and Cronbach Alpha to test the credibility of items. All pilot test results on items were valid and reliable above threshold for both CVI & Cronbach Alpha (≥ 0.7). Data was analyzed using the Statistical Package for Social Sciences (SPSS). The analysis involved frequency tables, correlation, regression analysis, and Hayes’ Process Macro version 3 for mediation analysis. Whereas the findings revealed a significant connection between corporate governance, risk management practices, and the quality of financial decision-making, the results also indicated that risk management practices partially mediate the link between corporate governance and financial decision-making quality. In light of these findings, the study recommends that Local Governments institutionalize robust and effective risk management practices as a means to enhance corporate governance and improve the quality of financial decision-making.