Assessing Corporate Governance Practices on the Financial Performance of Banking Industry in Zambia

Corporate governance plays a critical role in enhancing financial stability, accountability, and performance sustainability within the banking industry. This study examined the relationship between corporate governance practices and financial performance in the Zambian banking industry using panel data from fifteen commercial banks over the period 2014 to 2024. The study focused on key governance mechanisms, including board independence, managerial experience, and audit committee characteristics, while controlling for board meeting frequency and firm size. Financial performance was measured using Return on Assets (ROA) and Return on Equity (ROE). A quantitative explanatory research design based on the positivist paradigm was adopted, employing panel data regression techniques, including Pooled Ordinary Least Squares, fixed effects, and random effects models. Model selection was guided by the Breusch–Pagan Lagrange multiplier test and the Hausman specification test. Diagnostic tests for heteroskedasticity, serial correlation, and cross-sectional dependence were conducted, with robust standard errors applied to ensure reliable estimates. The findings revealed mixed effects of governance mechanisms on financial performance. Board meeting frequency was the only variable with a positive and statistically significant effect on ROA, indicating that active board engagement enhances oversight and operational efficiency. In contrast, board independence, managerial experience, and audit committee characteristics were not statistically significant. Additionally, none of the governance variables significantly influenced ROE, suggesting that shareholder returns may be driven more by external macroeconomic factors than internal governance structures. The study concludes that governance effectiveness depends more on the quality of board processes than structural compliance and recommends strengthening active oversight practices to improve financial stability and investor confidence.