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NEWPORT INTERNATIONAL JOURNAL OF CURRENT RESEARCH IN
HUMANITIES AND SOCIAL SCIENCES (NIJCRHSS)

Volume 5 Issue 1 Page 14-24, 2025

https://doi.org/10.59298/NIJCRHSS/2025/5.1.14240 Page | 14
Financial Disclosure and Non-Performing Loans of
Commercial Banks in Western Uganda
1
Sewanyina Muniru, 2Nyambane David, 3Ongesa Tom and 4Manyange Michael

Department of Business Administration, Faculty of Business and Management, Kampala International

1, 2, 3, 4

University, Uganda.
Corresponding Author Email: [email protected]

ABSTRACT
Non-performing loans have been an issue that has hampered the functioning of commercial banks across the world.
Using the liability management theory to evaluate the impact of financial transparency on non-performing loans of
commercial banks in Western Uganda. A mixed-method approach was used. A sample of 232 respondents was
obtained from a population of 550 persons using stratified, purposive, and simple random sampling methods. There
were 195 responses from three commercial banks, yielding an 84.1% response rate. The hypotheses were examined,
and the results demonstrated a substantial positive association between financial transparency and non-performing
commercial bank loans. Six participants were carefully chosen from three commercial banks and interviewed
utilizing interview guidelines. Using Nvivo software and Miles & Huberman (1994) approaches, interview data was
managed and analyzed, which revealed that those commercial banks are not currently under investigation for
accounting irregularities, they were also practicing segment reporting to show the performance of different
segments, there was also transparency in disclosing transactions in banks, there was also timely reporting, and
finally management discussion and analysis. The conclusion was that banks had internal controls for the
management and prevention of NPLs, and board members had put in place mechanisms and controls to manage and
prevent non-performing loans. Still, some of the internal controls instituted were not followed by management,
causing commercial banks to continue to have non-performing loans. Based on the study's findings and conclusions,
the study recommends that commercial banks implement strong internal control systems to enable them to deal
with loopholes that result in non-performing loans, as it has been discovered that having good financial disclosures
in place, such as internal controls, reduces loan performing loans and the reverse is true.
Keywords: Financial Disclosure, Non-performing Loans (NPL), Commercial Banks, Internal Controls, Financial
Transparency

INTRODUCTION
The literature lacks a clear definition of Non-performing Loans (NPLs). Previous studies have outlined NPLs
according to their specifications [1]. NPLs are loans that have not been repaid but still have a 90-day grace period
remaining beyond their maturity date when complete collection of principal and interest in compliance with the loan
or advances in issue is no longer possible, loans or advances are said to be NPLs [1]. There are three kinds of non-
performing loans, for example, Payments that are 90 days past due are regarded as fair, those that are 180 days past
due as dubious, and those that are a year past due as losses [2]. Additionally, for MFBs (Micro Finance Banks) and
commercial banks that provide consumer financing, a loan is deemed non-performing if it is not repaid within 30
days of the due date [3]. Loans that have not received maintenance for at least 90 days are classified as non-
performing loans (NPL) [4]. It is a debt that has defaulted or is about to default, in other words [4].
Globally, a non-performing loan is one in which interest and principal payments are more than 90 days late or more
than 90 days' interest has been refinanced. The viability of banks is heavily jeopardized by loan default [5]. These
poor loans cost banks money because of the impact they have on the quality of their asset portfolio and profitability.
This is by banking regulations, which compel banks to make provisions for non-performing loans and charge for
bad loans, both of which lower their income and loan portfolio [4]. Non-performing loans as a percentage of total
loans are 24.6% for Ireland, 31.3% for Greece, 9.5% for Egypt, 6% for Russia, 3.6% for South Africa, 3.2% for the
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USA, 2.9% for Brazil, and 1% for China [6]. The concept of governance has been applied in both economics and law
for centuries and it has been understood to mean the enforcement of contracts, protection of property rights, and
collective action [7]. Governance is associated with people operating within organizations. Organizations allow for
achieving outcomes beyond the reach of a single person [7]. Nevertheless, organizations must be governed properly
for them to achieve their objectives.
LITERATURE REVIEW
Akter and Hossain [8], investigated whether certain characteristics of the audit committees of Bangladesh's publicly Page | 15
traded banks might be used to explain the amount of non-performing loans (NPLs). A panel data set containing 250
bank-year observations for the years 2013 to 2017 was used in this study, and it included all 30 listed banks [8].
The impact of various audit committee characteristics on NPLs was investigated using the random-effects GLS
regression model with cluster robust standard error and AR (1) disruption [8]. The study discovered that frequent
audit committee meetings and a larger proportion of independent members in the audit committee help to minimize
NPLs. Findings, however, provide no conclusive proof that the other audit committee characteristics evaluated
(audit committee size, financial experience and financial literacy of the audit committee members, and professional
credentials of the audit committee Chairman) impacted the reduction of NPLs [8]. Their study was done on banks
in Bangladesh and used a random-effects GLS regression model and this raises contextual and methodological gaps
in the sense that the current research will be carried out on Ugandan banks and will use multiple regression to
determine the effect of internal auditing on non-performing loans.
Banks must thoroughly evaluate potential borrowers' ability to repay the loan; otherwise, there is a risk of extending
credit to possible defaulters [9]. Similarly, if banks extend credit unethically, such as by providing an unjustified
favor to further their own interests or accepting bribes from borrowers, there is a high likelihood that the amount
of NPLs will rise, creating agency issues that will harm the interests of shareholders [10]. According to [11], an
independent audit committee keeps an eye on a bank's financial reporting, internal controls, and risks to lessen
agency issues with dishonestly issuing credit and anticipating a negative association between an independent audit
committee and NPLs. By performing an empirical analysis on 86 banks listed on the stock markets in Pakistan,
India, and Bangladesh during the years 2006–2016, [12] confirmed theoretical relationships. [13], found a similar
correlation between audit committee independence and credit risks in 13 Jordanian commercial banks for the years
2009 to 2016. However, their study only focused on commercial banks from Asia and this raises a contextual gap
since the current research is focusing on commercial banks in Uganda also, they only focused on the independence
of the audit committee and this study will look at internal audit as a whole and this also raises conceptual gap.
The growing trend of non-performing loans (NPLs) in Bangladesh's banking industry exemplifies a widespread
issue of loan default that mostly results from borrowers' propensity to fail on their debts, who are often members of
the socially constituted upper class [14]. An adequate governance and control architecture, together with the
culture of loan default, may successfully manage this rising NPL trend. [15], examined the effects of audit committee
independence, director ownership, external audit quality, CEO authority, and bank size on the management of non-
performing loans (NPLs) in light of this context. The results highlight the significance of audit committee
independence, director ownership, and external audit quality in controlling NPLs after identifying two endogenous
variables in a system of linear equations and applying the system generalized method of moment (GMM) approach
of regression analysis. This study, however, discovers no discernible effect of CEO power on reducing NPLs. NPLs
are not linearly affected by Bank Size, assessed in a relative sense. This study raises methodological and conceptual
gaps as the current study will use multiple regression and relate transparency and internal control to non-
performing loans of commercial banks. [16], determine how internal banking controls affect the amount of non-
performing loans in Kosovo banks as mediation factors, linear regression model and mediation analysis are the
research techniques employed in this work and findings show that lending interest rates have a considerable impact
on non-performing loans, whereas the three mediator variables such as detective work, preventative measures, and
corrective action have an impact on lowering non-performing loans. Preventive control serves as a mediator and has
the greatest indirect impact on lowering NPLs. By incorporating the recommendations of Circular No. 2011-06
released on 20 May 2011 by the Tunisian Central Bank, [17] intended to investigate the extent to which the control
quality affects non-performing loans (NPLs) of Tunisian listed banks. Design, technique, and strategy for the
presence of foreign directors on the board of Tunisian banks are shown to increase credit risk using regressions
utilizing panel data that are applied to a sample of 11 listed banks between 2010 and 2015. These administrators
have greater authority than institutional administrators or state officials because of their knowledge, independence,
and access to new technologies. The risk committee outperforms the audit and credit committees in terms of
lowering non-performing loans, and by incorporating the Central Bank's guidelines, it is possible to empirically test
the effect of control quality on NPL and identify effective ways to improve banking governance practices.
Since the year 2000, Good Corporate Governance (GCG) has been implemented in Indonesia. One of the
foundational elements of the economic market system is good corporate governance [5]. The GCG application
offers a chance to develop and establish a favorable environment for business development and investment [14].
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This way of thinking makes the GCG implementation by Indonesian banks a crucial problem for achieving economic
success. [18], carried out a study aimed at collecting empirical data on GCG characteristics, as well as other
regulatory-driven factors such as bank size, capital adequacy ratios, and non-performing loans (NPLs), Secondary
data from 30 banks that are registered with BEI for the years 2011 to 2015 is the source of the data. The findings
indicate that the Capital Adequacy Ratio, Managerial Ownership, and Bank Size then influence positively and
significantly financial performance while other variables NPL have a negligible impact and Committee Audit have
a positive but negligible impact on banking financial performance, according to the research. Their study did not
Page | 16
look at the influence of interest rates on corporate governance practices and non-performing loans and this raises
a conceptual gap, also the study only considered banks in Indonesia which raises a contextual gap since the current
research will focus on commercial banks in Uganda.
About raising savings, reducing the risk of moral hazard and adverse selection, allocating resources to the most
fruitful projects, and risk diversification, the banking sector is crucial for several macroeconomic and microeconomic
variables [8]. Therefore, the banking system must operate efficiently, especially in growing and developing nations
[16]. With the use of the system GMM dynamic panel data estimator, [19] investigates the macroeconomic,
institutional, and bank-specific variables that contribute to nonperforming banking loans as a measure of the health
of the banking system in emerging market nations between 2000 and 2013. According to the results of the dynamic
panel regression analysis, nonperforming loans were negatively impacted by economic growth, inflation,
institutional development, return on equity and assets, regulatory capital to risk-weighted assets, and noninterest
income to total income, whereas they were positively impacted by unemployment, public debt, credit growth, lagged
values of nonperforming loans, cost to income ratio, and financial crises. The connected literature mentioned above
demonstrates that despite many efforts on the part of researchers to link internal controls, transparency, and non-
performing commercial bank loans, contextual and conceptual gaps remain. No study was conducted inside the
Ugandan setting, contextually speaking. The concept of transparency being a corporate governance guideline was
neglected in all research. These discrepancies necessitate the need for this study, which will focus on Uganda, to
establish the link between internal controls, transparency, and non-performing commercial bank loans.
METHODOLOGY
The study adopted cross-sectional research and correlational research designs. [20] defines a cross-sectional
research design as one in which data is collected once over a period of days, weeks, or months in an attempt to
provide answers to a research question. The cross-sectional design allowed the collection of data using different
modes of data collection such as self-administered questionnaires and face-to-face interviews [21]. Still, the study
being cross-sectional, data gathered represented what was going on at a particular point in time thus helping to
obtain useful data in a relatively short period saving time and costs of data collection [22]. For the correlational
design, this involved the exploration of the correlation between corporate governance practices and non-performing
loans of commercial banks. Quantitative data was the basis for drawing statistical inferences by relating the
independent and dependent variables. The population of the study was 550 comprising Bank managers, board
representatives, loan officers, and credit clients from three commercial banks in Western Uganda. Hence, these
provided appropriate data and were collected using a questionnaire and interview guide.
After the data had been collected, the researcher first carried out data processing. The processing of quantitative
data involved coding, entering the data into the computer using the Statistical Package for Social Sciences (SPSS
24.0), summarising them using frequency tables to identify errors, and editing them to remove errors [23].
Quantitative data analysis involves the calculation of descriptive statistics and frequencies for descriptive analysis.
For inferential statistics, correlation and regression analysis were used in the testing of the hypothesis at a 5% level
of significance [24]. The qualitative data collected was coded and grouped according to the study objectives and
emerging themes. Analysis was done through discursive and thematic methods [25]. The discursive method
considered the detail of the text, interpreting the analysed text and attributing meaning. Parametric tests were done
to prepare data for further analysis as follows.
Homoscedasticity
[26], also indicates that for all forecast scores the variance of residuals should be the same in forecast dependent
variable scores and it should appear linear and uniformly without funneling. If in the spread plot, funneling is not
shown, the data would not break the homoscedasticity assumption. This was done with the help of SPSS and the
results presented in the histogram, normal P-P plots, and scatter plots as below
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Page | 17

Figure 1 Homoscedasticity Results

From the graphical results above, the histogram shows that data is normally distributed and the normal P-P plot
shows that there was normal distribution as most of the plots lie on the straight line. The scatter plot indicates that
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the predictor values increase as the residual values also increase meaning there was heteroscedasticity in the data,
hence the absence of homoscedasticity in the data set.
Skewness and Kurtosis
The research data were subjected to tests for kurtosis (pointiness) and skewness (lack of symmetry). Investigations
were conducted to ascertain the positive (frequent scores are grouped at the lower end, with the tail pointing towards
the higher or more positive scores) and negative (frequent scores are grouped at the higher end, with the tail pointing
towards the lower more negative scores) skewness. To find out how much the scores concentrated in the tail of the Page | 18
distribution (kurtosis), additional testing was done. By executing the statistics as shown in the table below, the
features of leptokurtic distributions (thin-tailed and highly pointed) and platykurtic distributions (heavy-tailed and
relatively flat) were examined.
Table 1: Skewness and Kurtosis Results
N Minimum Maximum Skewness Kurtosis
Statistic Statistic Statistic Statistic Std. Error Statistic Std. Error

FD 189 4.00 4.75 -1.018 .177 .986 .352

NP 189 2.90 4.70 -.597 .177 -.858 .352

Valid N (listwise) 189

The skewness and kurtosis values in the given table were nearly zero, according to the results [27]. This
demonstrated that the normality test assumption that is, that the skewness and kurtosis values be zero or close to
zero in a normal distribution was satisfied. This suggested that since the premise of normalcy utilizing skewness
and kurtosis was met and tenable, the study's data were suitable for additional statistical testing.
Kolmogorov-Smirnov and Shapiro-Wilk Tests
Kolmogorov-Smirnov and Shapiro-Wilk tests were used to determine whether the distribution as a whole deviated
from a comparable normal distribution in our data. The results are presented in the table below;
Table 2: Kolmogorov-Smirnov and Shapiro-Wilk Tests
Kolmogorov-Smirnova Shapiro-Wilk
Statistic df Sig. Statistic df Sig.
Non-performing Loans .197 188 .000 .901 188 .000
Financial Disclosure .213 188 .000 .879 188 .000
a. Lilliefors Significance Correction

As seen in the preceding table above, the results derived from our data showed that all items had values that were
non-significant at P>.05. Given that the premise of normalcy utilizing the Kolmogorov and Shapiro tests was met
and reachable, this suggested that our data was normally distributed and appropriate for additional statistical
testing.
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RESULTS
Table 3: Descriptive Statistics on Financial Disclosure
Statements N Min. Max. Mean Std. Deviation
Our bank discloses its financial policies for evaluating assets and 189 4 5 4.62 .487
liabilities
There is timely reporting in our bank 189 4 5 4.57 .496 Page | 19
Management discussion and analysis section is catered for in 189 4 5 4.57 .496
preparation of financial reports
The company is not currently under investigation for accounting 189 4 5 4.57 .496
irregularities

Our bank provides comprehensive and meaningful notes to explain 189 4 5 4.48 .501
the numbers presented in financial statements
Our bank prepares clear, concise financial statements according to 189 4 5 4.43 .496
relevant accounting standards
There is transparency in disclosing transactions in our bank. 189 3 5 4.38 .577
Our bank practices segment reporting to show the performance of 189 2 5 4.38 .724
different segments
Overall Mean and Standard Deviation 189 4.50 0.534

Primary data 2024

From Table 3 above, the findings show that most of the respondents agreed that banks disclose their financial
policies for evaluating assets and liabilities as indicated by a high mean of 4.62 and supported by a low standard
deviation of 0.487, similarly, the respondents agreed that there is timely reporting in their banks as shown by high
mean of 4.57 and confirmed by low standard deviation of 0.496. furthermore, the findings show that the management
discussion and analysis section is catered for in the preparation of financial reports as indicated by a high mean of
4.57 and standard deviation of 0.496, in the same regard, the findings reveal that their banks are not currently under
investigation for accounting irregularities. The results also show that banks provide comprehensive and meaningful
notes to explain the numbers presented in financial statements as indicated by a high mean of 4.48 and supported by
a low standard deviation of 0.501. The findings also show that banks prepare clear, concise financial statements
according to relevant accounting standards as indicated by a high mean of 4.43 and supported by a low standard
deviation of 0.496. The findings further show that there is transparency in disclosing transactions in banks as
indicated by a high mean of 4.38 and low standard deviation of 0.577. Finally, the findings reveal that banks practice
segment reporting to show the performance of different segments as indicated by a high mean of 4.38 and confirmed
by a low standard deviation of 0.724. The overall mean of 4.50 and standard deviation of 0.534 indicate that most of
the respondents agreed with the statements that were used to measure financial disclosure

Table 4: Correlation Results on Financial Disclosure (FD) and Non-performing Loans (NP)
NP FD

NP Pearson Correlation 1 .378**

Sig. (2-tailed) .000

N 189 189

FD Pearson Correlation .378** 1

Sig. (2-tailed) .000

N 189 189

**. Correlation is significant at the 0.05 level (2-tailed).

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From Table 4 above, the results show that there is a weak positive relationship between financial disclosure and
non-performing loans of commercial banks (r=0.378, P=0.00<0.05). The relationship is statistically significant at
0.05, meaning that when members of the board disclose financial guidelines and policies, the non-performing loans
of commercial banks reduce slowly and the reverse is true.
Regression Results
Table 5: Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate Page | 20

1 .378a .143 .138 .48947

a. Predictors: (Constant), FD
b. Dependent Variable: NP
From Table 5 above, the results show a s positive overall relationship between financial disclosure and non-
performing loans of commercial banks as indicated by R= 0.378, and financial disclosure contributes 14.3% to non-
performing loans of commercial banks as indicated by R2= 0. .143, meaning that when board members perform their
role of financial disclosure, non-performing loans reduce by 14.3% and vice versa. The adjusted R square shows that
a unit change in financial disclosure causes a 13.8% change in non-performing loans of commercial banks.
Table 6: ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 7.459 1 7.459 31.135 .000b
Residual 44.801 187 .240
Total 52.260 188
a. Dependent Variable: NP
b. Predictors: (Constant), FD

From Table 6 above, degrees of Freedom (df) indicate how many separate pieces of information are used to compute
the sum of squares. In the case of the Regression, the df is 1, which is equal to the number of independent variables
(predictors). The entire number of observations less the total number of predictors is the residual's df, which is 187.
Calculated by dividing the total of squares by the number of degrees of freedom, or mean square (MS). The residual
MS is .240 and the regression MS is 7.459, F-value = 31.135 is the ratio of the Regression MS to the Residual MS.
A greater F-value suggests that the model explains a considerable percentage of the variation. Sig.: This stands for
the p-value, which is used to determine the statistical significance of the F-statistic. A score of.000 indicates that the
predictors significantly explain the variation in the result, suggesting that the model is highly significant (p < 0.000).
The dependent variable may be well explained by the independent variables (predictors) taken together since the
model has statistical significance (p-value =.000). With an F-value of 31.135, the model can explain a significant
portion of the variation in comparison to the residual, or unexplained variance. Out of the total variation of 52.260,
the model explains 7.459 of it, leaving a residual variance of 44.801 unexplained.
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Table 7: Coefficientsa
Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) -1.090 .907 -1.202 .231

FD 1.124 .201 .378 5.580 .000 Page | 21

a. Dependent Variable: NP

Without normalizing the units, they show the true effects of each independent variable (predictor) on the dependent variable. The value of
the dependent variable when all predictors are zero is called the intercept, and it is -1.090. Keeping all other factors equal, non-performing
loans rise by .378 units for every unit increase in financial disclosure. The variable representing non-performing loans rises by .378 units for
every unit increase in financial disclosure. These coefficients are obtained by standardizing the variables by placing them on the same scale
so that comparing the relative importance of each predictor is made simpler. Financial disclosure appears to have a moderately beneficial
impact on non-performing loans (standardized beta = 0.378, t = 5.580, p = .000<0.05), this implies that the null hypothesis (H01) which
stated that there was no statistically significant relationship between financial disclosure and non-performing loans of commercial banks was
rejected.

The perceived understanding of Financial Disclosure and Non-performing Loans of Commercial Banks
This section presents the interviewees’ perceived understanding of financial disclosure and non-performing loans
of commercial banks. To obtain a clearer picture, the interviewees were asked to answer each of the following
questions (What kind of internal control has the board instituted to prevent and solve the problem of non-performing loans 2.
In your opinion, do you think there is transparency in giving out loans to clients? If yes, how? 3. What efforts have the board
put in place to ensure that the internal controls in relation to giving out loans are sound and working?) and the themes and
sub-themes generated are presented in the figure below.
1st order Codes 2nd Order Themes Aggregated Dimension

Particular risk assessment

protocols implemented
Job segregation borrower screening Board-Made
and credit rating systems. Measures to Stop
Frameworks for ongoing Non-Performing
monitoring
Frequent internal audits
Internal Controls
Explicit communication and for the
documentation of the requirements Management and
for loan approval. Prevention of
The loan terms and conditions are Openness in the
accessible to the public. Issuance and
An honest and transparent Administration
borrower evaluation to prevent of Loans
prejudice or favoritism.
Steer clear of dishonest loan
distribution techniques.

Figure 2: Reality Radial Diagram on Financial Disclosure and Non-performing Loans

The results reveal that, generally, interviewees perceived financial disclosure and non-performing loans of
commercial banks as Internal Controls for the Management and Prevention of NPLs. On analyzing the transcripts
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from qualitative interviews, it was established that two major sub-themes emerged to mean internal controls which
are: Board-made measures to stop non-performing loans and openness in the issuance and administration of Loans.
Internal Controls for the Management and Prevention of NPLs
One of the main themes that emerged was the extent of board was established. Internal Controls for the Management
and Prevention of NPLs, with interviewees stating that in most cases, members of the board put in place mechanisms
and controls to manage and prevent non-performing loans and ensure that the internal controls instituted are
adhered to by management and this reduces non-performing loans. Page | 22
Board-Made Measures to Stop Non-Performing
The board took action to prevent non-performing loans by implementing specific risk assessment procedures, job-
segregating borrower screening and credit rating systems, frameworks for continuous monitoring, and regular
internal audits, according to an analysis of the scripts. The majority of interviewees emphasized that lowering non-
performing loans requires having rules and processes in place to guarantee that loans are granted in accordance with
them. But occasionally, management disregards the directives, and as a result, non-performing loans occur.
Openness in the Issuance and Administration of Loans
After analysis transcript, it was established that to fight non-performing loans, there is a need for transparency in
administering loans by explicit communication and documentation of the requirements for loan approval, the loan
terms and conditions are accessible to the public, an honest and transparent borrower evaluation to prevent prejudice
or favoritism, steer clear of dishonest loan distribution techniques and measures to stop insiders from influencing
loan decisions. All these ensure that loan information is available to all stakeholders and this in turn reduces non-
performing loans.
DISCUSSION
The empirical findings also revealed that financial disclosure has a significant influence on non-performing loans
and the null hypothesis which stated that there is no statistically significant relationship between financial disclosure
and non-performing loans of commercial banks was rejected meaning that when the board of directors of commercial
banks put in place mechanisms to ensure financial disclosure like bank preparing clear, concise financial statements
in accordance with relevant accounting standards, disclosing their financial policies for evaluating assets and
liabilities, banks providing comprehensive and meaningful notes to explain the numbers presented in financial
statements. It was also discovered the commercial banks are not currently under investigation for accounting
irregularities, they were also practicing segment reporting to show the performance of different segments, there was
also transparency in disclosing transactions in banks and there was also timely reporting and finally management
discussion and analysis section were catered for in the preparation of financial reports. All these had a positive impact
on reducing non-performing loans of commercial banks
The findings were in agreement with [8] who investigated whether certain characteristics of the audit committees
of Bangladesh's publicly traded banks might be used to explain the amount of non-performing loans (NPLs) and
discovered that frequent audit committee meetings and a larger proportion of independent members in the audit
committee help to minimize NPLs. Their findings, however, provide no conclusive proof that the other audit
committee characteristics evaluated (audit committee size, financial experience and financial literacy of the audit
committee members, and professional credentials of the audit committee Chairman) had an impact on the reduction
of NPLs and the findings were also consistent with [28] who emphasized that an independent audit committee
keeps an eye on a bank's financial reporting, internal controls, and risks to lessen agency issues with dishonestly
issuing credit and anticipating a negative association between an independent audit committee and NPLs.
Similarly, the findings were consistent with [29] conducted study to find out the impact of non-performing loans
(NPLs) of conventional banks in Nepal and the results of this study show that ROA, bank size, GDP, and inflation
have a significant impact on bad debt, but RCA does not have a significant impact on countries' bad debt. Banks and
policymakers should carefully consider GDP growth rates when making decisions related to bad debt. In the same
regard, the findings were in agreement with [18] who carried out a study aimed at collecting empirical data on
GCG characteristics, as well as other regulatory-driven factors such as bank size, capital adequacy ratios, and non-
performing loans (NPLs), and findings indicated that the Capital Adequacy Ratio, Managerial Ownership, and Bank
Size then influence positively and significantly on financial performance while other variables NPL have a negligible
impact and Committee Audit have a positive but negligible impact on banking financial performance.
CONCLUSION AND RECOMMENDATION
Based on the study findings and discussions, the study concludes that financial disclosures affect non-performing
loans of commercial banks. Banks had Internal Controls for the Management and Prevention of NPLs and board
members put in place mechanisms and controls to manage and prevent non-performing loans although some of the
internal controls instituted were adhered to by management and this has impacted commercial banks to remain with
non-performing loans. The study also concludes that implementing specific risk assessment procedures, job-
segregating borrower screening and credit rating systems, frameworks for continuous monitoring, and regular
internal audits, according to an analysis of the scripts were internal controls instituted by commercial banks to fight
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non-performing loans. However, lowering non-performing loans requires having rules and processes in place to
guarantee that loans are granted in accordance with them which management was disregarding and as a result, non-
performing loans occur. Based on the study findings and conclusions, the study recommends that commercial banks
should ensure that they have in place strong internal control systems to enable them do a ware with loopholes that
create non-performing loans since it was discovered that having in place good financial disclosures like internal
controls reduces loan performing loans and the reverse is true.
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CITE AS: Sewanyina Muniru, Nyambane David, Ongesa Tom and Manyange
Michael (2025). Financial Disclosure and Non-Performing Loans of Commercial
Banks in Western Uganda. NEWPORT INTERNATIONAL JOURNAL OF
CURRENT RESEARCH IN HUMANITIES AND SOCIAL SCIENCES 5(1):14-24
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