Abstract

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.