Mitigating Credit Risk through Corporate Governance: An Investigation into the Causal Pathways from Board Accountability to Reduced Non-Performing Loans in Uganda’s  Commercial Banks.

<ns3:p>Background Non-performing loans (NPLs) pose a critical threat to the stability and financial performance of commercial banks globally. This study is grounded in Agency Theory, which highlights the risk of conflicts of interest between bank management (agents) and shareholders (principals). It investigates the specific role of board accountability as a governance mechanism in mitigating NPLs within the under-researched context of commercial banks in Western Uganda. Methods A mixed-methods approach was employed. Quantitative data were collected via surveys from 195 bank employees and board members, selected through a combination of stratified, purposive, and simple random sampling from a population of 550, yielding an 84.1% response rate. The quantitative data were analyzed using descriptive statistics, Pearson correlation, and simple linear regression. Concurrently, qualitative data were gathered through interviews and analyzed using thematic analysis with NVivo software to provide depth and context. Results The quantitative analysis revealed a statistically significant strong positive correlation between board accountability and the reduction of NPLs, confirming that heightened board oversight is associated with improved loan performance. The qualitative findings substantiate this, identifying two key mechanisms: first, reduced improper board interference in the loan approval process, and second, proactive board engagement in resolving existing NPLs. Together, the data triangulate to show that a board functioning with high integrity and clear accountability is pivotal in controlling NPLs. Conclusions This study concludes that robust board accountability is a critical determinant of asset quality in commercial banks. It acts by aligning the interests of management and the board with those of shareholders, thereby curbing unauthorized influence and promoting prudent credit risk management. The findings underscore the importance of appointing high-integrity board members and strengthening governance structures. Future research should incorporate additional variables, such as macroeconomic conditions and regulatory frameworks, to develop a more comprehensive model of NPL determinants.</ns3:p>