Board Structure and Financial Performance of Selected Commercial Banks in Rwanda

Raissa Umugwaneza Ishimwe & Malgit Amos Akims
Mount Kigali University
Email: raissaishimwe2017@gmail.com

Abstract: This study examined the effect of board structure on the financial performance of selected commercial banks in Rwanda. Guided by the Agency Theory, which emphasizes effective governance mechanisms in aligning management actions with shareholders’ interests, the study investigated how elements of board structure specifically board size influence financial performance indicators such as Return on Equity (ROE) and Return on Assets (ROA). A descriptive and correlational research design was adopted to ensure comprehensive analysis. A census approach was used to collect data from all thirteen commercial banks operating in Rwanda as of June 2024, from which five banks Bank of Kigali, I&M Bank, Cogebank, Ecobank, and Access Bank were selected using convenience sampling due to accessibility and representativeness. Data were obtained entirely from secondary sources, primarily annual financial statements and reports covering the period 2019–2023, sourced from official bank websites and the Rwanda Stock Exchange. Data analysis was conducted using SPSS version 27, employing descriptive statistics to summarize the data, Pearson correlation analysis to assess relationships, and multiple regression analysis to test hypotheses. Diagnostic tests for multicollinearity, heteroscedasticity, and normality were also conducted to ensure model reliability. The findings revealed a strong positive and statistically significant relationship between board size and financial performance (r = 0.877, p < 0.01), and regression results confirmed that board structure variables, particularly board size and independence, are significant predictors of financial performance. The study concludes that well-structured boards enhance decision-making, oversight, and accountability, thereby improving profitability and efficiency in commercial banks. It recommends that Rwandan commercial banks maintain balanced boards that incorporate diversity, expertise, and independence to strengthen governance frameworks and promote sustainable financial growth.