Corporate Governance and Financial Performance in Banks: The Moderating Role of Information Leakage

This study explores the moderating role of pre-disclosure information leakage on the impact of board-level corporate governance on the financial performance of listed banks in East Africa. The research is driven by ongoing debates surrounding governance and performance, as well as the limited evidence available from emerging-market banking systems, where trading environments are often less regulated. The focus is on all 18 banks traded on stock exchanges in Kenya, Tanzania, Uganda, and Rwanda from 2010 to 2023, utilising a balanced panel dataset. Grounded in agency theory, information asymmetry, and efficient market hypotheses, the analysis investigates how information leakage moderates the effects of board size, independence, and meeting frequency on profitability and asset quality. Employing a sequential econometric approach, comprising pooled OLS, fixed and random effects models, and two-step system GMM, robustness diagnostics were conducted to ensure validity. The findings reveal that information leakage enhances short-term profitability but heightens future credit risk, with its moderating role amplifying both the positive effects of governance on profitability and the negative effects on asset quality. These results indicate that the effectiveness of governance is contingent on the information environment. This study provides novel insights for emerging markets and recommends that regulators and bank boards optimise board structures while reinforcing disclosure controls to strike a balance between market gains and the preservation of asset quality.

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Publication Details

Journal
Financial Markets Institutions and Risks
Published
2026-01-04
DOI
https://doi.org/10.61093/fmir.9(4).51-68.2025
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
0.00
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article

Corporate Governance and Financial Performance in Banks: The Moderating Role of Information Leakage

Athenia Bongani Sibindi, Patricia Lindelwa Makoni, Abdulmajid Mussa Nsekela
Financial Markets Institutions and Risks
Auditing, Earnings Management, Governance
article

Corporate Governance and Financial Performance in Banks: The Moderating Role of Information Leakage

Athenia Bongani Sibindi, Patricia Lindelwa Makoni, Abdulmajid Mussa Nsekela
article en

Abstract

This study explores the moderating role of pre-disclosure information leakage on the impact of board-level corporate governance on the financial performance of listed banks in East Africa. The research is driven by ongoing debates surrounding governance and performance, as well as the limited evidence available from emerging-market banking systems, where trading environments are often less regulated. The focus is on all 18 banks traded on stock exchanges in Kenya, Tanzania, Uganda, and Rwanda from 2010 to 2023, utilising a balanced panel dataset. Grounded in agency theory, information asymmetry, and efficient market hypotheses, the analysis investigates how information leakage moderates the effects of board size, independence, and meeting frequency on profitability and asset quality. Employing a sequential econometric approach, comprising pooled OLS, fixed and random effects models, and two-step system GMM, robustness diagnostics were conducted to ensure validity. The findings reveal that information leakage enhances short-term profitability but heightens future credit risk, with its moderating role amplifying both the positive effects of governance on profitability and the negative effects on asset quality. These results indicate that the effectiveness of governance is contingent on the information environment. This study provides novel insights for emerging markets and recommends that regulators and bank boards optimise board structures while reinforcing disclosure controls to strike a balance between market gains and the preservation of asset quality.

Financial Markets Institutions and RisksVol. 9(4)
BA School of Business and Finance (LV)
Openalex Percentile: Top 90%
Auditing, Earnings Management, Governance
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