ETHICAL STANDARDS AND FINANCIAL PERFORMANCE OF BANKING INSTITUTIONS. A CASE STUDY OF CENTENARY BANK MUKONO BRANCH.

BY LUKOWE KELUDIA 1163-05014-07715

A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF ECONOMICS AND MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A BACHELOR’S DEGREE IN BUSINESS ADMINISTRATION OF KAMPALA INTERNATIONAL UNIVERSITY

AUGUST, 2019 DECLARATION

I, Lukowe Keludia do hereby declare that this work is original and has never been submitted to any other institution for a ward of any Degree or Diploma. Where the work of others has been used, reference has been made there of.

~Ib kC~I

SIGNED: ~ DATE:..’ ~ ~-~‘S

LUKOWE KELUDIA 1163-05014-07715 APPROVAL

This report titled “Ethical standards and financial performance of banking institutions. A case study of centenary bank Mukono branch.” has been submitted by Lukowe Keludia for examination with my approval as the University Supervisor, and it’s now ready for presentation.

SIGNED~ DATE: .. .~~

DR. MABONGA ERIC

(SUPERVISOR) DEDICKflON

I dedicate this piece of work to my parents Mr. Waniala Peter and Mrs. Nyakecho Manjeri sister Naluwenda Mifly sisters and brothers who have fought their deliberations to have comage and fortitude and kept struggling inspite of odds in seeing my dreams ofeducation fblly realized.

it’ ACKNOWLEDGEMENT

First and foremost, I pass a word of thanks to the Heavenly Lord for being there for me always in my academic career for this success I count on today.

I extend a vote of thanks to a number of people who unreservedly, contributed towards the accomplishment of this research work.

1 also would like to acknowledge the assistance and role played by the following personalities to the successful completion of this study.

I cannot say exactly how grateful I am to my supervisor, Dr. Mabonga Eric. His guidance in this study was beyond measure. Thank you also for providing me with professional advice, encouragement and your time that has spurred me to success. In the same way,

I would like to thank the management and staff of centenary bank Mukono branch and the proprietors of the selected businesses for the time they gave me most especially in evenings after the long day’s work, They honestly filled the questionnaires, surely, without their input; this study would not have come to fruition.

I cannot forget the efforts of the staff of Kampala International University (KIU) especially the lecturers at College of Economics and Management and Department of Accounting and Finance for their input and effort that made me acquire the invaluable knowledge.

Your contribution can never be quantified but will always be reminiscent whenever I look through this book.

Lastly, I thank my parents for sacrificing the little they had, in thick and thin and invested in my

education. This sacrifice that you made failed in other peoples’ homes.

Thank you for looking after me and enabling me to acquire a lifelong investment.

iv LIST OF TABLES

Table 1. 3.1 showing sample size 20 Table 2: 4.1 Response rate 27 Table 3: 4.2: Gender of respondents 27 Table 4: 4.3: Respondents by Age 28 Table 5: 4.4: Showing highest level of education attained 29 Table 6: 4.5 Marital status of the respondents 30 Table 7:4.6 shows the relationship between respect and financial performance of centenary bank Mukono branch 3 1 Table 8: 4.7 showing the relationship between integrity on financial performance 33 Table 9:4.8 indicates how to examine relationship between customer focus and financial performance 36 Table 10: 4.9 showing the financial performance of centenary bank, Mukono district 38 Table 11: 4.10 Model summary 40 Table 12: 4.11 ANQVA 41 Table 13: 4.12 Coefficients 41

V LIST OF ACRONYMS

ATMs. Automated Teller Machines

CVI Content Validity Index test

DV Dependent Variables

ICT Information Communication Technology

TV Independent Variables

TV Intervening Variables

KIU Kampala International University

ROA Return On Asset

SPSS Statistical Package for Social Sciences

vi TABLE OF CONTENTS

DECLARATION

APPROVAL

DEDICATION

ACKNOWLEDGEMENT iv

LIST OF TABLES

LIST OF ACRONYMS vi

TABLE OF CONTENTS vii

ABSTRACT xi

ChAPTER ONE 1

INTRODUCTION 1

1 .0 Introduction 1

1.1 Background of the study 1

1. 1 .1 Historical background Perspective 1

1. 1 .2 Theoretical perspective 6

1.1.3 Conceptual perspective 6

1.1.4 Contextual perspective 7

1.2 Statement of the Problem 8

1 .3 Purpose of the study 8

1 .4 Specific objectives 8

1.5 Research Question 9

1.6 Scope of the Study 9

1 .6.1 Geographical scope 9

1.6.2 Time scope 9

1.7 Significance of the Study 9

VII 1 .8 Conceptual frame work .10

CHAPTER TWO ii

LITERATURE REVIEW 11

2.0 Introduction 11

2.1 Relationship between respect and financial performance 11

2.2 Relationship between integrity on financial performance 12

2.3 Relationship between customer focus and financial performance 15

2.3.1 Basic Attributes of customer focus in the Banking Sector 16

CHAPTER THREE 19

METFIODOLOGY 19

3.0 Introduction 19

3.1 Research Design 19

3.2 Population of the Study 19

3.3 Sample Size 19

3.4 Sampling Technique 20

3.5 Sources of data 21

3.5.1 Primary Data collection 21

3.6 Data Collection Methods 21

3.6.1 Questionnaire Method 21

3.6.2 Response rate 21

3.7 Measurement of Variables 22

3.7,1 Validity of Instruments 22

3.7.2 Reliability of Instruments 22

3.7.3 Data Validity 22

3.8 Data Analysis 23

VIII 3.8.1 Analytical Model .23

3.9 Ethical issues 24

3. 10 Limitation of the study 24

CHAPTER FOUR 26

DATA PRESENTATION, ANALYSIS AND INTERPRETATION 26

4.0 Introduction 26

4.1 Response rate 26

4.2 Background Information of Respondents 27

4.2.1 Gender of respondents 27

4.2.2 Marital status of the respondents 30

4.3 To determine the relationship between respect and financial performance of centenary bank Mukono branch 30

4.4 To determine the relationship between integrity on financial performance of centenary bank in Mukono branch 33

4.5 To examine the relationship between customer focus and financial performance of centenary bank in Mukono branch 36

4.6 The dependent variables 38

4,6.1 Regression analysis 40

4.7 Interpretation of Findings 42

ChAPTER FIVE 43

SUMMARY, CONCLUSION AND RECOMMENDATIONS 43

5.1 Introduction 43

5.2 Summary of findings and interpretation 43

5.3 Conclusion 45

5.4 Recommendations 46

5.5 Limitation of the study 47

ix 5.6 Areas for further research .48

REFERENCES 49

APPENDICES 55

APPENDIX I: QUESTIONNAIRE 55

APPENDIX II: LETTER OF INTRODUCTION 61

x ABSTRACT

The purpose of the study was to establish the relationship between ethical standards and financial performance of banking institutions in Mukono District. The study was based on three specific objectives; to determine the relationship between respect and financial performance of centenary bank in Mukono branch, to determine the relationship between integrity on financial performance of centenary bank in Mukono branch and to examine the relationship between customer focus and financial performance of centenary bank in Mukono branch. It was based on a descriptive survey design basing on the use of qualitative and quantitative approaches that was adopted to establish the relationship between ethical standards and financial performance of banking institutions in Mukono District. Simple random sampling and purposive sampling techniques were used in the study. Questionnaires were used to collect primary and secondary sources of data from 60 out of 72 respondents using random sampling. Therefore, here, data analysis, procedures and response rate are focused on. Then the findings conclusions and recommendations are presented. Data analysis was done using computerization use of graphs, frequencies and cross tabulation. Finally the report looked at the study results and gave the discussion of each finding. According to objective one, it was noted that respect to each member of the staff in the bank was valued with the percentage of 67% and customer respect is given the first priority in the financial performance of centenary bank with the percentage of 65% who strongly agreed. The second research objective it indicated that, there was a positive effect that integrity helps in the growth of centenary bank to perform its services with the respondents who strongly agreed 69% and those who agreed with the response of 17% indicates that honesty in the banking sector of centenary bank, Mukono branch as a result, experiences high output, and productivity hence leading to effectiveness of service delivery. According to objective three, summary findings also revealed that, customer focus affects the profitability of financial performance of centenary bank which have helped to achieve the set goals and objectives with the percentage of 69% which in return helps in attracting potential and customer focus is limited by the borrower’s from borrowing with the percentage of 58% who strongly agreed. I obtained the findings and analyzed the data by use of tables and charts which helped to present data and arrive at conclusion and recommendations. Conclusion, constructing appropriate indicators and setting appropriate ethical standards for financial market was challenging. It required extensive analysis of profit margins that satisfied customers is very important for current and future performance of commercial banks. On the other hand, if the ethical standards are poor, financial perlormance of centenary bank will be unsatisfactory. Based on the data analysis in this study, financial performance of banking institutions should rely heavily on the guarantor as the main factor of mitigating ethical standards. Recommendation, as a way of discussion of ethical issues in staff meetings should be practiced in the various banks. When this is done, the staff or workers of the bank are generally abreast with the ethical standards needed by the bank and will adhere to it. The tendency to forget about the standards is there so constant reminders thorough staff meetings will do the workers a lot of good.

xi CHAPTER ONE

INTRODUCTION

1.0 Introduction

This chapter presents the background of the study, statement of the problem, purpose of the study, objectives of the study, research questions, scope, significance of the study, justification of the study and conceptual frame work.

1.1 Background of the study

1.1.1 Historical background Perspective Over the years, a great deal of research has focused on ethical standards. Like many constructs in management, ethical standards. Has been conceptualized and measured in several ways. Common to all the conceptualizations of ethical standards found in the literatures in a link with ethical principles and morals or ethical problems that arise in a business environment. Previous studies have also demonstrated that ethical standards are positively related to the process by which good conducts are applied in business (Palomino, 201 1).

In addition, (Chakrabarty. 2006) stated that ethical standards involves the exhibition of high level of integrity in business dealings, and in must apply to all aspects of business conduct which must be relevant to the conduct of individuals and business organizations as a whole. According to (Watkins, 2011), ethics is seen as the “Science of conduct”. It involves learning what is right and doing the right thing. Thus, when discussing the rules and principles that define right and wrong conduct, one is dealing with ethics. Most researchers of ethical standards treat the business firm as exhibiting good ethics when the organizational members known what is right or wrong in the workplace and doing what is right. The process of exhibiting good ethics is seen as the principles, policies and values that serve as operational guidelines for individuals and organizations for decisions concerning what is morally rigln and or wrong (Ayee, 1997). To (Aja and Okwandu, 2006), ethics is the science relating to moral action and one’s value system.

1 Managers envision ethics as dealing with principles or morality and what is wrong or right Jaja and (Okwandu, 2006). Ethics is concerned with motives and attitudes and the relationship of these attitudes to the good of the individual, Ethics has to do with action we wish people would take, not actions they must take. Then, values are interwoven with ethics, values are personal beliefs about the truth and worth of thoughts, objects from the laws as ethics may be distinguished from the laws. Ethics are internal to one, and it looks to the good aspect of an individual rather than society as a whole, and concerns the “why” of one’s actions. The law comprises of rules and regulations pertinent to society as a whole, and is external to one and concerns one’s actions and conduct. What did the person do or fail to do as opposed to why do the people act as he or she did? These are issues in ethics (Mansfield, 2008).

Consequently, the study of ethical standards provides business owners with the parameters what is acceptable and unacceptable behavior. It provides the standard against which people can compare their behavior. It provides a focus and common goal. It helps business owners to deal with managerial mischief which includes illegal, unethical or questionable practices of individual managers or organizations. It is a common believe that organizations have goals or objectives which must be accomplished to achieve goals. All organizations are purposive. They are established to accomplish an objective. Individuals in an organization work in order to help accomplish these objectives (Ogechukwu, 2013).

These individuals wish to accomplish their own goals through the organization when the goals of the individual and the goals of the organization are the same, we have goal congruency. A company may have many or multiple objectives. The objectives could be stated to cover major operation responsibility areas such as, shareholders, customers, employees and society, and joint venture partners. These goals cover the major stakeholders and they must be achieved through positive indices that indicate organizational performance, such as return on investment, sales volume, profitability and profit margin among others gap this study explores to analyze the interactive, between the dimensions of business ethics and organizational performance. Hence, this study is intended to examine “Ethical standards and financial performance with focus on selected companies in centenary bank, Mukono branch (Gosselin, 2011).

2 Ethics was advocated by the greatest Greek philosophers: Socrates, Plato and Aristotle. The creator of ethics as a study of morality was the Greek philosopher Socrates (470-399 BC), who used ethics to define the terms of human virtues. The most important personal values are: righteousness, courage, honesty. tolerance, goodness, sincerity and fairness. In the field of ethics, Socrates and the entire Hellenic world saw the issue of is a human characteristic and the greatest moral value. Socrates believed that virtue can be taught, i.e. that virtue is knowledge. A man must know what good is in order to do well (Paulet, 2011).

Ethics belongs to philosophy because it studies human behaviour from a certain moral aspect. The focus of ethics is the community, and moral good is seen as the universal welfare of the community. Since ethics and morality mean the same in etymological and semantic terms, they are often used as synonyms. Morality, as a social norm of human behaviour, is a group of unwritten rules and customs governing interpersonal relationships. One of the characteristics of morality is its autonomy because moral norms are valid in themselves (the subject adopts them independently, and not under pressure from others). It is based on the principles that determine how a person should behave. Morality is the goal that we should strive towards. Since morality is a system of values, it serves to decide what is good and what is not, i.e. to differentiate between good and bad actions. Morality is very similar to law, but in contrast to law, it does not involve any political or economic sanctions (Tijani and Sunmonu, 2013).

Ethics as the study of morality examines the meaning and goals of moral norms and establishes the criteria for moral evaluation. The main ethical terms include: morality, goodness, conscientiousness, evil, freedom, happiness, love and virtue. Righteousness, morality and economic rationality and self-interest frequently overlap and intertwine. In the said context, love can be described as a strong feeling of commitment. It is a condition that involves the following elements: affection (mutual respect), altruism (mutual selflessness) and helpfulness (readiness to help each other). Love is the basis of all fellowship, it involves support and care, and its ultimate goal can be absolute devotion (Cheng, 2010).

3 Morality relies on the awareness of the individual and society. An individual has a moral feeling when he hears ‘the voice of conscience” a sanction that the subject applies to himself in a specific moral situation. Examining one’s own actions means that we rationally justify and analyze our actual behaviour. The unconscious element that forms our conscience is the fear of punishment, so that the inner norm serves to prove our moral coherence. Thus, conscience as a moral paradigm is always present within us and we cannot deny it. The evidence lies in the public demonstrations by which we try to prove to the society our righteousness through conscientious behavior (Zineldin, 2006). Business ethics is a world operational philosophy that seeks to establish those organizational conducts, attitudes, perceptions and value systems that conform to established standards. it began to develop as a field of study in the 1970s. Theologians and philosophers laid the groundwork by suggesting certain principles that could be applied to business organizations as a “code of conduct” that guide their operations (Ferrel, 2008). The need for established standards of behaviour had predisposed most organizations especially financial institutions to evolve and entrench ethical practices as part of their culture to mold and direct their employees’ actions and value systems toward the expected ~code of conduct” in an attempt to enhance corporate performance (Ayozie, 2012) observed a number of well-published scandals that eventually result to public outrage on deception and fraud in business organizations (Sigurthorsson, 2012) notes that unethical management practices affect corporate performance therefore, stressed the need for business firms to integrate ethics in an attempt to establish those organizational conducts that conform to established standards.

Ethical standards are an interdisciplinary academic field of study RICS (2000), however this feature also makes it controversial. For this reason, there is no consensus among researchers as to the adaptation of the concept to organizational practices and the resolution of ethical dilemmas.

Ethical standards tries to find answers to such questions as what behaviors are acceptable or unacceptable for a good working life (Dogarawa, 2004) within the framework of a reciprocal relationship between ethical principles and organizations. According to the definition of (Lages, 2012). Ethical standards are the pursuit of understanding what can be considered acceptable about the activities of organizations operating in a particular culture at a particular time.

4 I-lolme, (2008), Opines that ethics is a core management tool employed to foster the required value system within its operational system through logical positivism and conditional normatism. It is concerned with the normative aspect of behavior an organization considers as standard and desirable, that revolve around the pervasive value system of “right” and “wrong” or “good” and “bad”. Therefore, ethical standards in management perspective is morally driven, it seeks to strike a balance between “right” and “wrong”.

Generally, ethical perspectives on management as observed by (Drucker, 2007). Involve all managerial activities, responsibilities, authorities and expectations that have to do with value judgment on what is right and wrong. This, however, reflects on the moral consciousness and morality inherent in most organizations that evolve around social responsibility, social responsiveness, social contract and corporate performance. Agha (2010), confirmed that ethical quality of organization is determined by the separate actions of central management and their staff, employers, their employees and their clients. Each of these is almost always at one time or the other facilitating decision making which produce a sustainable result that directly help to set the moral tone of the organizations.

Thus, culture implies assumptions and beliefs about organization’s values, beliefs, symbols, myth, etc that give meaning to organizational members, and collectively accepted as a guide to expected behaviour. Therefore, culture is a problem of internal integration and external adaptation. As a way of doing things in a given place, culture becomes a set of shared values, norms and beliefs that guide organizational members to behave as expected (Abara, 2014). More so, (Hofstecle, 1984) argues that divergent cultures connote different values in conducting business activities. These values shape the roles with which organizations assume within societies and what is expected of them.

Ethical management practices of commercial banks according to (Fassin, 201 1).is relatively directed to the compliance of the established ‘~code of banking ethics”. However, the basic code of banking ethics consist of transparency of transactions, honest, confidentiality and keeping information on customers, proper use and care of information, accurate record keeping, promotion of banking service, service to customers, handling customers complaints, impartiality, reliability, avoiding conflict of interest, refraining from bribery and corruption, positive and fair dealings with officials, government representatives and competitors (Ghand and Oseyomon,

5 2014),. In the same vein, (Hortacsu and Nur, 2004), identified the following unethical behaviors as: fraud and forgery, bribery, customer discrimination, power pressure, lying and cheating, masterminding banks robbery, spreading negative information, breaching personal secrecy and money laundering.

1.1.2 Theoretical perspective Utilitarianism as the moral standard among other theories favours this study. It sought an objective basis for making value judgments that would provide a common acceptable norm for determining social policy. The most promising way to reach such an objective ground of agreement, the theory suggests is by looking at the various policies and comparing the beneficial and harmful consequences of each, The right course of action from an ethical point of view would be to choose the policy that would produce the greatest amount of utility. Utilitarian principle holds that an action is right from an ethical point of view, if and only if the sum total of utilities produced by that act is greater than the sum total of utilities produced by any other act the agent could have performed in its place (Gibbons, 2011).

Utilitarian theory advocates that the right action for a particular occasion is the one that produces more utility than any other possible action; it does not mean that the right action is the one that produces the most utility for the person performing the action. Rather, an action is morally right if it produces the most utility for all persons affected by the action (Agha, 2010).

1.1.3 Conceptual perspective

Ethical standards

Ethical standards are the pursuit of understanding what can be considered acceptable about the activities of organizations operating in a particular culture at a particular time.

Financial Performance

Is a general measure of an entity’s overall financial health over a given period of time and can be used to compare similar entities across the same industry or to compare industries or sectors in aggregation.

6 Respect. Ethical executives demonstrate respect for the human dignity, autonomy, privacy, rights, and interests of all those who have a stake in their decisions; they are courteous and treat all people with equal respect and dignity regardless of sex, race or national origin.

Integrity. Ethical executives demonstrate personal integrity and the courage of their convictions by doing what they think is right even when there is great pressure to do otherwise; they are principled, honorable and upright; they will fight for their beliefs.

Customer focus

It refers to the orientation of an organization toward serving its clients needs. Having a customer focus is usually a strong contributor to the overall success of a business and involves ensuring that all aspects of the company put its customers satisfaction first.

1.1.4 Contextual perspective Centenary Bank is a commercial bank in Uganda. It is one of the commercial banks licensed by the Bank of Uganda, the central bank and national banking regulator. The bank is a large financial services provider in Uganda. It is primarily involved in the promotion of development through loans to rural farmers, processors of agricultural produce, small traders, small manufacturers, importers, and exporters. While engaged in all areas of commercial banking, the bank has a significant portion of its portfolio in the microfinance arena in an attempt to meet the needs of the many individuals and business entities with limited means. As of December 2017, the banks assets were UGX:2.706 trillion (US$722 million), with shareholders equity of UGX:557.8 billion (US$150 million).

The bank was founded in 1983 as a credit trust, Centenary Rural Development Trust (CRDT), by Simeon Lutaakome, Hugh Francis Pulle, Paul Kateregga, Vincent Kirabo kya Maria, Emmanuel Mpande, and John Ogutu. In 1985, CRDT began to provide financial services to the public. The bank became a fully licensed commercial bank in 1993, after receiving a license from the Bank of Uganda. As of May 2016, Centenary Bank was the largest majority indigenous Ugandan commercial bank. Therefore, it is against this background that the researcher undertook the study to establish the relationship between Business ethics and financial performance of banking institutions in Mukono District

7 1.2 Statement of the Problem In the banking industry today, Centenary bank as a financial institution is the most visible and has attracted most public interest. This has also raised the interest in the ethical challenges facing the banking industry. The banking sector within the Ugandan economy has become the most critical sector commanding more heights on the level and direction of economic growth and transformation of Uganda. But unfortunately the much respected, valued integrity and customer focus of the functions of financial performance banking institutions have been called to questioning due to recurring fraud issues and accounting scandals, banking is a typical capitalist activity aimed to gain profit (Ogechukwu,2013).

Despite all these incidences, ethical challenges in centenary bank have become a source of embarrassment to the nation despite efforts by the appropriate law enforcement agencies to track down perpetrators, centenary bank still face challenges of unethical behaviors which have been cited as a major cause of financial problems coupled with the misuse of fraud and forgery, bribery, customer discrimination, power pressure, lying and cheating, masterminding banks robbery, spreading negative information, breaching personal secrecy and money laundering which has led to winding up of some banking institutions. This prompted the researcher to investigate more about the ethical standards and financial performance of centenary bank, Mukono district (Adeyemo, 20 12).

1.3 Purpose of the study The purpose of the study was to establish the relationship between ethical standards and financial performance of banking institutions in Mukono District.

1.4 Specific objectives i. To determine the relationship between respect and financial performance of centenary bank in Mukono branch. ii. To determine the relationship between integrity on financial performance of centenary bank in Mukono branch. iii. To examine the relationship between customer focus and financial performance of centenary bank in Mukono branch?

8 1.5 Research Question i. What is the relationship between respect and financial performance of centenary bank in Mukono branch? ii. What is the relationship between integrity on financial performance of centenary bank in Mukono branch? iii. What is the relationship between customer focus and financial performance of centenary bank in Mukono branch?

1.6 Scope of the Study

1.6.lGeographical scope

The headquarters and main branch of Centenary Bank are located in Mapeera House, at 44-46 Kampala Road, in the central business district of Kampala, Uganda’s capital and largest city. The geographical coordinates of the bank’s headquarters are: 0°18’53.0”N, 32°34’41.0”E (Latitude: 0.314722; Longitude: 32.578056).

1.6.2 Time scope

The study took a period of 6 months. This was selected to enable the researcher write her report with coherent information from the respondents as it enabled these (respondents) to give responses that would be typical of their opinion from the observations made over this period.

1.7 Significance of the Study This study was carried out with a view of increasing the wealth of knowledge accumulated so far on the subject matter, ethical standards and financial performance.

The study also exposed the objectives of the firm with respect to how ethical standards is applied in the decision making process of a company in order to achieve set goals which the realization of the expected performance for proper competitive advantage.

In addition, Mukono organizations, businessman and women, students, resources owners, and lecturers in management were stand to gain a lot as the study to contribute immensely to their wealth of experience in the area of ethical standards, and its stimulated thoughts in creative minds as a basis for further research.

9 The study was also stimulated and encouraged further research and inquiry on ways in which the ethical standards and financial performance of banking institutions could be implemented in order to enhance financial discipline so that Government funds and resources could be efficiently and effectively used.

1.8 Conceptual frame work These are sets of coherent ideas or concepts organized in a manner that makes them easy to understand, they are theoretical structures of assumptions, principles and rules that hold together the ideas comprising a broad concept. The conceptual framework comprises of dependent and independent variable. The ethical standard on financial performance is the dependent variable. It is achieved by the presence and proper functioning of all the predefined independent variables in relation to each category of the organization’s objectives (Owusu, 2012). Proper functioning of independent variables provides reasonable assurance of proper functioning of dependent variables. The organization realizes present objectives of efficient and effective operations, collection of accurate, reliable and informative financial reports that comply with relevant legal and regulatory requirements. Figure 1: 1.1 Conceptual framework

Independent Variables Dependent variables

ETFHCAL STANDARDS FINANCIAL PERFORMANCE

Respect • Profitability • Integrity o Growth • Customer focus e Effectiveness

Source: Adopted and modified by Paulet (2011). The independent variables is perceived as the ethical standards whereas the dependent variable was the performance of banking. The professed goal of making institution will improve the welfare of people living along Mukono area.

10 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction This chapter looked at the ethical standards and financial performance of banking institutions of Centenary bank, Mukono branch. It consists of the existing literature on financial performance of banking institutions by different scholars/research studies from magazines, text books, journals and newspapers.

2.1 Relationship between respect and financial performance The relationship between respect and financial performance has been a primary issue in the field of business and society over the past 25 years. Significant research has been carried out in several geographical locations, with different parameters for defining ethical and corporate social responsibility and using numerous proxies for financial performance.

According to the findings of (Orlitzky, 2003), they indicate that the code of ethics has a positive impact on financial performance and that this is strongest in the Ugandan context. (Griffin and Mahon 1997), supported the theory of the positive code of ethics and financial performance relationship with findings from their research. They demonstrated this by studying and classifying the results of 62 studies, spanning 25 years of research, into three categories; positive, negative and no effect/inconclusive. They identified 33 results that found a positive relationship, 20 with negative results and 9 which found no relationship or were inconclusive.

With respect to the relationship between code of ethics and financial performance, (Basel Committee on Banking Supervision, 2010), found that companies publicly committing to follow an ethics code as an internal control strategy achieved significantly higher performance measured in both financial and non-financial terms Similarly, (Berrone, 2005), in their working paper —Corporate Ethical Identity as a determinant of Firm Performance: Satisfaction indicate that firms with a strong ethical identity achieve greater degree of stakeholder satisfaction, which in turn, positively influence the firm’s financial performance

11 However, in contradiction to the studies above, there have been a few studies which found no relationship between respect of ethical standards and financial performance, and furthermore, others such as (Hill, 1990), which have shown that a negative code of ethics and financial performance relationship exists. Further, most of the literature about the study variables is for the public sector but in the developing countries. Therefore, this study provides findings that tend to confirm this literature and to some extent close the gap between the study variables.

2.2 Relationship between integrity on financial performance Managers and their firms are not isolated from a society. According to (Rendtorff and Mattson 2011), companies are seen as human communities using social practices to achieve common social objectives. These objectives are implemented through a relationship of trust and authentic relationships with customers. The most important ethical principles supporting “well-being of customers” are as follows: client autonomy; dignity; honesty; vulnerability of the client; and representation of basic prerequisites for good access to customers.

According (I-leskett, 1994), the profit and company growth are primarily stimulated by customers integrity, which is immediately formed by customer satisfaction. Customer satisfaction is determined by quality of services which is created by satisfied, loyal and productive employees (service-profit chain effect). The service-profit chain effect has been analyzed by many other authors in their works Yee,

Yeung and Cheng (2010); Gelade and Young (2005) ; Kamakura (2012) , Sauraet (2005), Walker, Smither and Waldman (2008) argue that a high rate of integrity is extremely important in retail banking because it represents the only form of differentiation from competitors. Through a positive change in leadership and corporate culture, positive changes in satisfaction and thus profitability of individual customers can be expected.

According (Graafland and Van de Ven 2011), emphasis on the social responsibility of banks requires increased professionalism of those who works in financial sector, stronger focus on ethical codes, personnel skills verification and other approaches such as transparency, focus on interest’s stakeholders, cooperation with social institutions.

12 Robin (2008), states that a company would like to operate in an efficient economic system which creates opportunities for economic prosperity growth and happy people’s life. The mission of ethics is to minimize the abuse of company’s power in the mutual exchange relations and reduce negative impacts on people’s daily lives. The fundamental question regarding business ethics is how to make capitalism more ethical. An important part of this analysis is to understand the nature of trade relations with stakeholders. A sense of their own profit from these relationships prevails for all business participants, which the author defines as a win-win situation (customers buy products because they believe that it will bring them more value than paid before; employees work for companies because they expect higher value than pay; society demands a relationship with companies in a similar way).

On the other hand, there are firms within these relationships which expect a profit from these relationships with stakeholders which would exceed their price. Although the exchange relationship constitutes a free choice for each participant, there are large differences between the power of companies and stakeholders (gaps in knowledge, information etc.). And for these reasons, the application of ethical standards in combination with the legislation of the State is required. According to the author, two basic dimensions of relationships with stakeholders are honesty and respect.

The aim of ethical banking is to achieve economic benefits to include social goals, too, while two objectives groups are relevant in the socio-economic system (San-Jose, Retolaza and Qutierrez Goiria 2011); (Icke, Caliskan, Ayturk and Icke (2011). (Fassin and Gosselin 2011) argue that large institutions had strong ethical culture such as Fortis, Arthur Andersen and Co, AIG and fail anyway. These cases show the discrepancy between official statements and proceedings of top management.

Failure of management and ethics can lead to strategic mistakes with fatal consequences for the company. These cases and the global financial crisis highlight the need for strong ethics and responsibility in the company’s management.

13 According Palomino and Martinez (2011), efficiency of ethics programs is different in the bank. Some programs are primarily focused on achieving a favorable image in relation to the socio economic institutions (government, media, society, customers), and do not have a significant impact on employee ethics.

According to Gibbons (2011), many banks do not act transparently in Great Britain, the scope of the information provided is not sufficient in comparison with other European countries; quality information is absented for people who are in financial difficulties etc.

Tea, Pauli~id and Krstini~-Ni~i~ (2011), evaluated ethical aspects of banking in financial institutions finding out that the banking culture lacks integrity, awareness, responsibility, creativity, objectivity and professionalism. The moral code does not include rights and obligations lbr employers and employees, ethical principles in marketing and advertising, ethical aspects of price setting, corporate responsibility towards society and the environment. Watkins (2011), argues that banking is a typical capitalist activity aimed to gain profit.

Policy of laissez-faire believes that individuals and companies may seek to increase their financial fori~une without any limitations. Financial market presents unlimited opportunities for fortune growth. These factors operate more intensively if profitable opportunities grow in the economy. For example, Goldman Sachs is also involved in ethically problematic activities that generate high profit enormously.

According to Lefcovitch ,(2009), banks are predominantly oriented to maximizing profits, and behave totally ruthlessly in their operations against depositors, investors and general public interests. In their attempt to maximize their own profit, banks violate laws, regulatory rules and ethical codes. According to Fassin and Gosselin, (2011), the more bankers talked about social responsibility, the more they focused on increasing shareholders value, their own personal bonuses and on the level of their “golden parachutes’~ after the financial crisis had broken out.

14 Chatterjee and Lefcovitch, (2009), claim that the importance of ethical standards for financial market consists in the fact that financial markets operate with money of other owners and risk may generate profit as well as loss. A risk which is too high must be minimized for two reasons: it must be maintained the confidence in investment and the undertaken risk may not mean a dangerous investment. Downfalls of banks are usually caused by bad-risk investments. In this process, expectations of extremely high profit have a dazzling effect on bank managers and selfish interests of banks dominate in their proceedings. Public interests are relegated to the sidelines.

2.3 Relationship between customer focus and financial performance By achieving their objective, banks do not pay sufficient attention to the correct approach to their clients in real life. This argument is confirmed by Greg Smith, a manager of the largest investment banks in the world, Goldman Sachs, who said upon leaving the bank in March 2012 “that he always takes care to advise their clients what he considered for them to be correct, even if it meant less money for the company. That view of the matter, however, is increasingly unpopular in Goldman Sachs” (Nemec, 2012). Clients required a high level of acceptance of their needs and accurately provided services from bank employees (Lages, Pierce 2012).

According to (Croxford, Abramson and Jablonowski 2006), customer services, brand, quality and price of bank’s products and services are the dominant aspects of consumer behavior. Berry (2005) states that banks do not understand needs of their clients, and not take advantage of many opportunities to establish stronger relationship with their clients.

Chakrabarty (2006), defined four basic factors that affect the overall customer satisfaction, These factors have been arranged according to their importance: client satisfaction with a branch (i.e. the speed of service, access of each employee, privacy, and opening hours); economic satisfaction (fees, interest); satisfaction with the remote access (i.e. the level of e-banking), and availability of ATMs.

Baumann, Elliott and Burton (2012), examined loyalty of bank customers, which was based on the overall satisfaction, emotional attitudes towards bank, service quality, perception of market situation (costs and benefits of the change) and customer characteristics. According to the

15 authors, combination of two fhctors, namely the emotional connection with the bank and economic benefits appears to be unbreakable shield for relationships with bank customers, and should protect the bank from its competitors.

A survey by Deloitte (2012), has indicated strong dissatisfaction of centenary consumers with the amount of bank fee and inadequate services. Differences between centenary customers and customers from the Republic of Uganda are especially in their loyalty to their banks, which is significantly lower. Satisfied customers are very important for current and future performance of commercial banks,

Korau~ (2011), states that satisfied customers stay loyal to their banks, and it requires five times less effort, time and money to keep old customer than to get a new one. A loyal customer is willing to pay a higher price. To attract a satisfied customer to a competitor means to reduce the amount of a product price by 30%. A satisfied client represents free form of advertising, is willing to purchase new products offered by the bank, and causes retrospectively a sense of satisfaction and pride in employees’ work and business. 2.3.1 Basic Attributes of customer focus in the Banking Sector Customer focus is formed by several factors and significantly determines the loyalty of Customer focus, which means the fact that higher quality of services creates a higher customer satisfaction. Saari and Judge (2004), suggest that satisfaction with the nature of performed job (the job challenge, the autonomy, the diversity and the job area) represents the most important factor of the formation of satisfaction with job among employees. According to the authors, employee satisfaction is closely related to customer satisfaction through a high quality of services. Bhutto, Laghari and Butt, (2012), examined the impact of organization’ climate on the employee satisfaction and defined the following three factors which have a positive and significant impact on the job satisfaction: organizational structure, identity, and interpersonal relationship.

Babakus, Yavas, Karatepe and Avci ,(2003) analyzed the essential attributes of the growth of the financial performance of the commercial bank, and stated that the area of job satisfaction is an important factor that significantly affects ability of staff to provide quality data to their clients. Similar conclusions are indicated also by (Matzler and Renzl ,2006, Melton and Hartline 2010,

16 or Saura, ContrI, Taulet and Velasquez 2005, Yee, Yeung and Cheng, 2010), indicate that loyal employees have many opportunities to understand and meet specific needs of bank customers, which represents a higher quality of services.

According to the authors, the loyalty of employees represents an essential factor in the growth of quality service, the customer focus and loyalty and plays a major role in the process of increasing of the financial performance. (Lages and Piercy 2012), argue that customers require a high level of acceptance of their needs and accurate custom services. In this context, the correct understanding of customer needs as a result of employee job satisfaction is the key element to improve the quality of provided services. Coelbo and Augusto (2010), investigated the basic characteristics of job application for the creativity of staff working in customer services, and provided a conclusion that creating a favorable working environment stimulates efficiency of bank employees in carrying out their jobs. According to authors, managers who are working in the service sector should consider the autonomy of employees, their diversity of the job, the quality of the feedback and their identity in the job process; because these presented attributes create a creative approach to meeting job requirements. (Maddern, Maull and Smart, 2007), examined the relationship of customer satisfaction depending on the employee satisfaction and quality services in the area of the financial services in the United Kingdom. Results of this study confirm a high correlation between employee satisfaction and customer satisfaction.

Therefore, it is important to examine the employee satisfaction and the acceptance of customer needs, because these factors can create suitable conditions for successful operation of the bank on the market in a competitive environment. Personal productivity is significantly formed by relationship to employer and customers, which determines the level of work quality in all areas of the bank, and potentially increases its productiveness. These attitudes also shape the social system in which banking business actors operate. Banks in Slovakia (as well as in other countries) have their own ethical code, in which they undertake to offer only services that meet customer requirements and interests and will not offer services which clearly do not meet their needs (Slovenská banková asociácia, 2007). What is the reality? This question will be examined by our research, too.

17 Trends in customer satisfaction development confirm their special sensitivity to acceptance of own financial needs for business contacts with the commercial bank. Therefore, it is necessary to form customer satisfaction by appropriate approach through high level of the acceptance of customer needs by employees of a bank because this fact causes positive effects on financial performance of the commercial banks.

Using effective implementation of business ethics in the commercial banking, it would be necessary to search and find new economic reasons for socially responsible behavior of banks. In order to be efficient in application of these activities in the banking sector, they have to primarily support strategic and business goals of the bank. In this context, taking care of own employees and customers is considered to be a very important part of business ethics activities in the commercial banking sphere.

18 CHAPTER THREE

METHODOLOGY

3.0 Introduction This chapter represents procedures or methods that were employed in data collection and analysis; it describes the research design, study population, sample size, sample design, sample procedures, data collection tools and analysis.

3.1 Research Design

The researcher used a descriptive survey design based on the use of qualitative and quantitative approaches that were adopted to establish the relationship between ethical standards and financial performance of banking institutions in Mukono district, Centenary bank as a case study. This specifies how data was collected and analyzed, the research employed purposive sampling where the study was conducted at an appointment time and specific respondents were interviewed in order to get the specific needed information out of them (Kothari, 2014).

3.2 Population of the Study The research was constituted from the study population of 72 comprising of clients of banking institutions in centenary bank Mukono branch and these included the managers, tellers and clients who were part of the banking institution.

3.3 Sample Size This refers to the number of respondent to who you obtain the required information of the study. The sampling frame work was drawn from the list of clients of banking institution and at random sample where all the members of the study population had an equal and independent chance of selection in a sample. For example 72 respondents was chose to represent the total population and this comprised of 60 as the sample size; 10 managers, 12 supervisors, 16 tellers and 22 clients.

19 By using Solver’s Formula.

N +N (e)2 Where; the required sample size the known population size the level of significance, which is fixed at 0.05

72

= 1 + 72(0.05)2 72

— 1 + 72 (0.0025) 72

— 1 + 0.195 72

— 1.195 n = 60 Table 1. 3.1 showing sample size

Categories of the population Population size Sample Techniques Managers 17 10 Purposive Supervisors 25 12 Purposive Tellers 17 16 Simple random Clients 30 22 Purposive Total 72 60 Source: Primary Data 2019

3.4 Sampling Technique The researcher used both simple random and purposive sampling techniques respondents were randomly selected and categorized, this comprised of both genders but of different marital status and age groups and the researcher used 60 respondents that is; This comprised of 10 managers, 12 supervisors, 16 tellers and 22 clients. This intended to get a variety of views and unbiased response which made the study a reality.

20 3.5 Sources of data Data is defined as facts, opinion, and statistics that have been collected together and recorded for reference or for analysis (Saunders et al. 2009).The source of data is from primary source that is the use of questionnaires.

A combination of primary and secondary data sources were used to extract data in an attempt to establish the relationship between ethical standards and financial performance of banking institutions in Centenary bank M ukono branch.

3.5.1 Primary Data collection The primary source of data was got from questionnaires (structured and unstructured) from the relevant people. This was done after the pretest of the questionnaire. The organization continued to grow into a center of academic excellence. Primary data gave detailed definitions of terms and statistical units used in the study. Questionnaires and the response rate were used to extract primary data.

3.6 Data Collection Methods According to (Mugenda, 2003), the successful completion of a sampling procedure connects the research with the respondent and specifies the kind and number of respondents who was involved. The investigator knew at this stage not oniy what was studied, but also who to approach for the required information. The information was available, provided that the right ‘connection’ between the researcher and the respondents was made. This connection was made through the methods of data collection.

3.6.IQuestionnaire Method This method was convenient and easy to tabulate and the answers were expected within short time, this involved oral written questionnaires for the respondents to read and interpret what was expected of them (Williams, 2003).

3.6.2 Response rate Respondents were given two weeks to complete the questionnaires. The researcher submitted 60 questionnaires at Centenary bank, Mukono branch. However, by the end of the data collection process, 52 questionnaires were returned posing a respondent rate of 87% and non- respondent

21 rate of l3% as shown in the table 2 below. It implied that more than half of the target population participated in the process giving high level of precision to the findings.

3.7 Measurement of Variables

3.7.1 Validity of Instruments Validity is the efficiency or the degree to which a method, a test or a research tool actually measures what is supposed to be measured. It refers to the accuracy of the research data. For this case, the validity of the questionnaires was tested using the Content Validity Index Test (CVI). This involved item analysis carried out by the supervisors and an expert who was knowledgeable about the study. This process involved examining each item in the questionnaire to establish whether the items bought out are the ones expected. Item analysis was conducted using the scale that runs from relevant (R), Neutral (N), to irrelevant (I).The instrument is refined based on experts’ advice. The following formula was used to test validity index (Carole 2008).

CVI = No. of items regarded relevant byjudgç~

Total No. of items

52/60 xlOO =87%

3.7.2 Reliability of Instruments

Reliability means the degree of consistency of the items, the instruments or the extent to which a test, a method, or a tool gives consistent results across a range of settings or when it is administered to the same group on different occasions.

3.7.3 Data Validity

Before the final data was analyzed, the collected data was pre-tested as part of the pilot study to ensure that the right data was made available. Any other missing data was corrected and made One method of testing for reliability is the internal consistency method.

The internal consistency method provides a unique estimate of reliability for the given test administration. The most popular internal consistency reliability estimate is given by Cronbach’s

22 alpha. It is expressed as alpha Np! [l+p (N-i)] Where N equals the number of items and p equals the mean interterm correlation.

3.8 Data Analysis The analysis done was quantitative in nature. The study made use of Statistical Package •for Social Science (SPSS) software in conducting the analysis. Frequency distributions, as well as tables were used to present the data. Cronbach alpha was used is assessing reliability of data used. Discussion of findings and analysis were given through the use of means and standard deviation, percentages, correlation and regression analysis tools.

3.8.1 Analytical Model Before processing the responses. the completed questionnaires were edited for completeness and consistency. The data was coded to enable the responses to be grouped into various categories. The findings were presented using tables, frequencies, percentages, and tabulations. Tables were used to summarize responses for further analysis and facilitate comparison.

For this study, the researcher was interested in to establish the relationship between ethical standards and financial performance of banking institutions in Mukono District.

The model used in the study took the form below:

Y= a+131X1-f- 132X2+ [33X3+ç

Where: Y Financial Performance as measured by ROA

~ Constant Term

[3= Beta Coefficient—This measures how many standard deviations a dependent variable will change, per standard deviation increase in the independent variable.

X1 Respect

X2 Integrity

X3 Customer focus

ç Error term

23 Null hypothesis

There is no significant relationship between ethical standards and financial performance of banking institutions.

Z test and F test were used in the study, 0.05 level of significance was used as a reference in rejecting or accepting the hypothesis.

3.9 Ethical issues Research ethics play a central role in ensuring that research findings in a study was credible and

reliable as pointed out by (Trochim , 2006). As such, the research upheld high degree of ethical considerations in this study was based on (Sekaran, 2003) suggestions.

First, the participants had the right to participate where no attempt to force or coerce the participants were made a priority in this study. As such, the participants were reminded of their rights to withdraw from the study at any time during the study.

Further, the issue of confidentiality was also considered in this study where the participants were assured of the privacy of the data they provided in this study.

With reference (Saunders, 2009), the completed questionnaires were treated with confidentiality where all the participants were considered anonymous. By upholding these research ethics, the researcher ensured that findings in this study were reliable.

3,10 Limitation of the study The researcher in carrying out the research work was limited in the following ways; the research was limited by time period. The researcher had only six months to carry out the research.

Due to this limit the study could not cover all the components of ethical standards affecting the performance of financial institutions and posed difficulties to compile all the necessary information about the effects of ethical standards on the performance of financial institutions due to tin~e limit. Due to constraints of time, materials and financial resource, the study was confined to only Centenary bank, Mukono branch. To mitigate the impact of these limitations, the researcher exercised the greatest amount of care and vigilance in conducting the study.

24 Given the harsh economic conditions it was difficult to ensure that one gets more than one respondent per organization.

As a result the study treated a single respondent to represent the ethical standards prevalent in that organization.

Worse still the business owners were busy attending to their customers and rarely spared time for the researcher. Financing the research study was too costly in terms of transport costs, feeding and processing of the proposal and research report.

25 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.0 Introduction This chapter involves presentation, analysis and interpretation of the study results. Data presented, analyzed and interpreted according to the research objectives. It was presented in the form of tables and figures basing on the responses got from the study respondents that were selected during the process of data collection.

The discussion of findings has been arranged in accordance with demographic characteristics of respondents’ and objectives of the study as were formulated in chapter one of this report. The findings were from both primary and secondary sources. The findings are presented in the gist of the three objectives that the study was set to achieve;

To determine the relationship between respect and financial performance of centenary bank in Mukono branch, to determine the relationship between integrity on financial performance of centenary bank in Mukono branch and to examine the relationship between customer focus and financial performance of centenary bank in Mukono branch?

The analysis is based on the objectives of the study and the presentation and the interpretation clone with the help of tables, pie charts and narrative text as follows;

4.1 Response rate The researcher submitted 60 questionnaires at Centenary bank in Mukono branch. However, by the end of the data collection process, 52 questionnaires were returned posing a respondent rate of 87% and non~ respondent rate of 13% as shown in the table below. It implied that more than half of the target population participated in the process giving high level of precision to the findings.

26 Table 2: 4.1 Response rate

Questionnaires Freq ~iency Percentage distributed Respondents 52 87% Non response 8 13% Total 60 100 Source: Primary 2019

The feedback received from the pilot study showed that more respondents took time to fill in the questionnaires and the discrepancy of 13% could be caused by the respondents who failed to get time to fill the questionnaires.

4.2 Background Information of Respondents This section shows the gender of the respondents, age bracket, and highest level of education attained. The respondents which were selected for this study were 52 respondents

4.2.1 Gender of respondents The study considered both male and females, therefore the respondents were asked to state their gender and the following data was obtained.

Table 3: 4.2: Gender of respondents

Gender Frequency Percentage Male 32 62% Female 20 38 Total 52 100 Source: Primary Data 2019

Table 4.2 shows that, Financial Performance in centenary bank Mukono branch employs both male and female employees though the majority are male being represented by 62 percent while female are represented by 38 percent. This implies that financial performance at centenary bank employs more male which implied that men are more committed to work since there are associated with a lot of responsibilities in families than female although there is a difference of

27 24%. It was an indication that organizational performance at centenary bank is not biased in employing.

Orlitzky et al (2003), in his study investigated relationship between respect and financial performance of the effectiveness of employee according to their gender with the response of 62% of the men were more diligent at workplace compared to women with 38% indicated through a sample of 52 who were selected randomly.

They indicate that the code of ethics has a positive impact on financial performance and that this is strongest in the African context.

Table 4: 4.3: Respondents by Age

Response Frequency Percentage 18-29 years 12 23 30-39years 20 38 40-49years 16 3 1 49 years and Above 04 8 Total 52 100 Source: Primary Data, 2019

Table 4.3 as seen above indicate that 23% were in the age range of (18-29) years , 38% were in the age range of (30-39 years), 31% were in the age of (40-49) years, and 8% were 49 and above.

From the above presentation therefore it was realized that there were more respondents in the age group of (30-39) years, 38% who took part in the study. The least group was between 49 and above.

The highest percentage of 38% implied that centenary bank Mukono district is safe as far as Ethical standards are concerned.

Employees between this age brackets of (30-39) are highly committed at work because of the need to stabilize in their career and earn a livelihood as evidenced.

28 Ethical standards are essential in business world as far as codes are concerned therefore; there is a close relationship between and how to use ethical standards effectively and everyone’s work, study and life (Barlow, 2017).

Those of 49 and above means that when people reach their old age, they always have the demand to secure their retirement moments at their respective origins, their responsibilities also increase hence always have no time for organization tasks as proposed by (Barlow, 2017) verified more on the performance of individual in organization setting as the output delivered by an individual in relation to a given role during a particular period of time under the set of circumstances operating at the point of financial performance.

Table 5: 4.4: Showing highest level of education attained

Response Frequency Percentage (%) Certificate 1 1 21 A ‘level certificate 14 27 Degree 19 37 Masters 8 15 Total 52 100 Source: Primary Data, 201

Table 4.4 shows that 21% of the respondents who work at Centenary bank Mukono branch

were certificate holders followed by those at A, level certificate 27% , 37% were degree holders and 1 5% were having a master’s degree.

From the above presentation, the researcher realized that the biggest percentages of respondents were having a degree and the least group were those of master’s.

Meaning that centenary bank considers education and experience when selecting its employees to ensure quality work there. It should uphold the present standard as far as ethical standards and financial performance is concerned as mentioned by Berrone et al (2005) satisfaction indicate that firms with a strong ethical identity achieve greater degree of stakeholder satisfaction, which in turn, positively influence the firm’s financial performance.

29 4.2.2 Marital status of the respondents The marital status of the respondents was also covered and analyzed to assess their views in relation to the study variables of ethical standards and financial performance of banking institutions in Centenary bank Mukono branch as shown below.

Table 6: 4.5 Marital status of the respondents

Marital status Frequency Percentage % Married 26 50 Single 16 31 Divorced 10 19 ritI 52 100

Source: Primary Data, 2019

Table 4.5 indicate majority of the respondents constituting 50% were married, followed by 31% single, and 19% divorced.

From the above presentation the researcher realized that there were more respondents who were married 50% implied that Centenary bank Mukono branch is not safe as far as Ethical standards is concerned because such employees have got a lot of commitments in their homes where at times they tend to absent from work having maternity and paternity leaves as evidenced by (Palomino and Martinez 2011), although failure of management and ethics can lead to strategic mistakes with fatal consequences for the company.

4.3 To determine the relationship between respect and financial performance of centenary bank Mukono branch. The first research objective was to determine the relationship between respect and financial performance of centenary bank Mukono branch. The data collected was based on the four likert scale was presented and interpreted as provided below.

30 Table 7:4.6 shows the relationship between respect and financial performance of centenary bank Mukono branch.

Strongly Agree Disagree Strongly Total Respect Agree Disagree F % f % f % f %f % Customer respect is given the 34 65 12 23 2 4 4 8 52 100 first priority in the financial performance? Your respect in the bank 27 52 10 19 10 19 5 10 52 100 motivates more customers to centenary bank? You respect customers 18 34 14 18 1 1 21 9 17 52 100 behaviour at all times? You respect the views of others 28 54 12 23 2 4 10 19 52 100 even if they are different? You respect each member of 35 67 11 21 3 6 3 6 52 100 the staff in the bank?

Respect affects the financial 30 58 12 23 2 4 8 15 52 100 performance of centenary bank? Source: Primary Data, 2019

Table 7 above present’s findings on the relationship between respect and financial performance of centenary bank Mukono branch.

The data collected was based on the Likert scale of strongly agreed, agreed, disagreed and strongly disagreed.

Concerning how customer respect is given the first priority in the financial performance according to the findings the 65% of the respondents strongly agreed, 23% agreed while 4% of

31 the respondents disagreed while 8% of the respondents strongly disagreed with the findings of the study.

The findings indicated that respect in the bank motivates more customers to centenary bank as indicated by responses 52% of the respondents who strongly agreed, 19% agreed while 19% disagreed and 10% of the respondents strongly disagreed.

The findings show that, there is respect to customers’ behavior at all times as indicated by responses 34% of the respondents strongly agreed, 18% agreed with the findings, 21% disagreed while 17% of the respondents strongly disagreed.

According to (Chatterjee and Lefcovitch 2009), banks are predominantly oriented to maximizing profits, and behave totally ruthlessly in their operations against depositors, investors and general public interests thus its revealed that it is difficult to avoid emphasizing employee to evaluate ethical aspects.

The findings indicated that, you respect the views of others even if they are different as per the responses 54% of the respondents who strongly agreed, 23% of the respondents, 4% of the respondents disagreed while 19% of the respondents strongly disagreed.

The findings indicated that, respect to each member of the staff in the bank as per responses 67% of the respondents who strongly agreed, 21% of the respondents, 6% of the respondents disagreed while 6% of the respondents strongly disagreed. Rendtorff and Mattson (2011), the research revealed that banking institutions should adhere strictly to banking ethics is all about good customer relations in order to provide quality services to their customers.

The findings indicated that respect affects the financial performance of Centenary bank as per responses 58% of the respondents who strongly agreed, 12(23%) of the respondents, 4% of the respondents disagreed while 15% of the respondents strongly disagreed.

The relationship between respect and financial performance of Centenary bank Mukono branch indicated that a positive relationship that, respect to each member of the staff in the bank was valued with the percentage of 67% and customer respect is given the first priority in the financial performance of centenary bank with the percentage of 65% who strongly agreed.

32 According to Fassin and Gosselin (2011), who conducted the study of the relationship between respect and financial performance their result showed that, these cases show the discrepancy between official statements and proceedings of top management.

4.4 To determine the relationship between integrity on financial performance of centenary bank in Mukono branch.

The second research objective was to determine the relationship between integrity on financial performance.

The study was presented based on the findings from the field as presented in the values assessed below,

Table 8: 4.7 showing the relationship between integrity on financial performance.

Integrity Strongly Agree Disagree Strongly Total Agree Disagree T~ % f~ % f % f % f % Integrity is profitable to the 30 58 9 17 7 13 6 12 52 100 members in the financial performance? Integrity affects the 26 50 9 17 5 10 12 23 52 100 performance centenary bank? Integrity helps in the growth of 36 69 9 17 2 4 5 10 52 100 centenary bank to perform its services? integrity is effective in 18 35 10 19 12 23 12 23 52 100 financial performance of centenary bank? Integrity helps in the 30 58 9 17 7 13 6 12 52 100 management of the business? Integrity has strongly helped in 28 54 10 19 8 15 6 12 52 the financial performance of centenary? Source: Primary Data, 2019

The study findings in table 8 show the relationship between integrity on financial performance.

33 The findings indicated that integrity is profitable to the members in the financial performance as per the responses 58% of the respondents strongly agreed while 17% agreed while 13% of the respondents of disagreed and 1 2% of the respondents strongly agreed on the study provided. Furthermore, from individuals to organization level the importance of ethical standards has been revealed by the work done by Graafland and Van de Ven (2011), in the study conducted to find out the relationship between integrity on financial performance of selected parastatal in Uganda is emphasized on the social responsibility of banks requires increased professionalism of those who works in financial sector, stronger focus on ethical codes, personnel skills verification and other approaches such as transparency, focus on interests stakeholders, cooperation with social institutions. The study findings also indicated integrity affects the performance centenary bank as indicated by responses 50% of the respondents who strongly agreed while 17% of the respondents, 10% of the respondents while 23% of the respondents who strongly disagreed. Robin (2008) argues that ethical standards are not straightforward task as it requires individual to change the behavior by operating in an efficient economic system which creates opportunities for economic prosperity growth and happy people’s life. ~I’he findings revealed that integrity helps in the growth of centenary bank to perform its services by responses of 69% of the respondents strongly agreed, 17% of the respondents agreed while 4% disagreed and 10% strongly disagreed respectively. According to Watkins (2011), ethical standards in the financial institutions help one to achieve his targets. He argues that banking is a typical capitalist activity aimed to gain profits. The findings revealed that, integrity is effective in financial performance of centenary bank by responses 35% of the respondents who strongly agreed, 19% agreed while 23% disagreed and 23% strongly disagreed in that regard. Matzler et al (2006), states that policy of laissez-faire believes that individuals and companies may seek to increase their financial fortune without any limitations. The findings revealed that, integrity helps in the management of the business as indicated by responses 58% of the respondents who strongly agreed, 17% agreed 13% disagreed while 12%. Therefore, Chatterjee and Lefcovitch (2009) uncovered the importance of integrity in our life, as every person achieves the targets through involving in predominantly oriented to maximizing

34 profits, and behave totally ruthlessly in their operations against depositors, investors and general public interests. The findings revealed that, integrity has strongly helped in the financial performance of centenary as per responses of 54% of the respondents who strongly agreed, 19% agreed 15% disagreed while 12%. Chatteujee and Lefcovitch (2009), therefore, they recommended that downfalls of banks are usually caused by bad-risk investments. In this process, expectations of extremely high profit have a dazzling effect on bank managers and selfish interests of banks dominate in their proceedings. To identify the relationship between integrity on financial performance in organization indicated that integrity helps in the growth of centenary bank to perform its services with the respondents who strongly agreed 69% and those who agreed with the response of 17% indicates that honesty in the banking sector of centenary bank, Mukono branch as a result, experiences high output, and productivity hence leading to effectiveness of service delivery.

35 4.5 To examine the relationship between customer focus and financial performance of centenary bank in Mukono branch. The third research obj ective was to examine relationship between customer focus and financial performance. Table 9:4.8 indicates how to examine relationship between customer focus and financial performance.

Customer focus Strongly Agree Disagree Strongly Total Agree Disa :ree f % f % f % f % f % Is customer focus limited by 30 58 9 17 7 13 6 12 52 100 the borrower’s from borrowing? Customer focus helps in the 26 50 9 17 5 10 12 23 52 100 growth of the financial performance? Customer focus plays a vital 26 50 9 17 5 10 12 23 52 100 role in the financial performance of Centenary bank. Customer focus has strongly 28 54 12 23 2 4 10 19 52 100 helped in the effectiveness of financial performance in centenary bank? Customer focus is helpful in 27 52 10 19 10 19 5 10 52 100 the growth financial performance of the business? Customer focus affects the 36 69 9 17 2 4 5 10 52 100 profitability of financial performance of centenary bank? Source: Primary Data, 2019

The study findings in table 9 explain on how examine relationship between customer focus and financial performance. The study findings indicated that, customer focus is limited by the borrower’s from borrowing as indicated by responses 58% of the respondents strongly agreed, 17% agreed 13% of the respondents disagreed and 12% of the respondents strongly agreed with the findings.

36 Lages et al., (2012) by achieving their objective, banks do not pay sufficient attention to the correct approach to their clients in real life.

The study findings indicated customer focus helped in the growth of the financial performance result revealed that 50% of the respondents strongly agreed, 17% agreed while 10% disagreed and 23% of the respondents strongly disagreed. In this regards, Croxford et al (2006), investigated that customer services, brand, quality and price of bank’s products and services are the dominant aspects of consumer behavior.

The study findings revealed that customer focus played a vital role in the financial performance of Centenary bank which indicated 50% of the respondents strongly agreed, 17% agreed, 10% of the respondents who disagreed and finally 23% who strongly disagreed.

According to Berry (2005), states that banks do not understand needs of their clients, and not take advantage of many opportunities to establish stronger relationship with their clients.

The findings on customer focus has strongly helped in the effectiveness of financial performance in centenary bank 54% of the respondents strongly agreed 23% agreed, 4% disagreed and 19% strongly disagreed. Individual performance is very important in financial institutions and using effective implementation of business ethics in the commercial banking, it would be necessary to search and find new economic reasons for socially responsible behavior of banks (Slovenská banková asocidcia 2007).

The study findings also revealed that, customer focus was helpful in the growth of financial performance of the business as indicated by responses 52%, strongly agreed, 19%, agreed 19% disagreed and 10% strongly disagreed.

According to the authors, Yee, Yeung and Cheng (2010), the customer focus of employees represents an essential factor in the growth of quality service, the customer satisfaction, and loyalty and plays a major role in the process of increasing of the financial performance.

The study findings also revealed that, Customer focus affects the profitability of financial performance of centenary bank? Indicated by responses 69%, strongly agreed, 17%, agreed 4% disagreed and 10% strongly disagreed.

37 According to Avci, (2003), analyzed the essential attributes of the growth of the financial performance of the commercial bank, and stated that the area ofjob satisfaction is an important factor that significantly affects ability of staff to provide quality data to their clients.

The summary findings indicated that, customer focus affects the profitability of financial performance of centenary bank have helped to achieve the set goals and objectives with the percentage of 69% which in return helps in attracting potential and customer focus is limited by the borrower’s from borrowing with the percentage of 58% who strongly agreed.

4.6 The dependent variables

The dependent variables which is the financial performance. The study was presented based on the findings from the field as presented in the values assessed below.

Table 10: 4.9 showing the financial performance of centenary bank, Mukono district.

Financial performance Strongly Agree Disagree Strongly Total Agree Disagree f % f % f % f % f % Profits have been increasing 30 58 9 17 7 13 6 12 52 100 compared to the previous years. There is reduction of bad debts 26 50 9 17 5 10 12 23 52 100 in the previous periods. There is a reduction of non- 36 69 9 17 2 4 5 10 52 100 performing loans in the credit section. There is increase in the number 37 71 5 10 6 12 4 7 52 100 of customers in the bank. There is increase in the number 30 58 9 17 7 13 6 12 52 100 of interests paid back by customers. There is increase in the number 28 54 10 19 8 15 6 12 52 of accounts opened in centenary bank compared to the previous periods. Source: Primary Data, 2019

The study findings in table 10 show the relationship between integrity on financial performance.

38 The findings indicated that profits have been increasing compared to the previous years as per the responses 58% of the respondents strongly agreed while 17% agreed while 13% of the respondents of disagreed and 12% of the respondents strongly agreed on the study provided.

According to Graafland and Van de Ven (2011), in the study conducted to find out that financial performance of selected parastatal in Uganda is emphasized on the social responsibility of banks requires increased professionalism of those who works in financial sector, stronger focus on profits and focus on interest’s stakeholders, cooperation with social institutions.

The study findings also indicated that there is reduction of bad debts in the previous periods as indicated by responses 50% of the respondents who strongly agreed while 17% of the respondents, 10% of the respondents while 23% of the respondents who strongly disagreed. Robin (2008) argues that financial performance is straightforward task as it requires individual to change the behaviour by operating in an efficient economic system which creates opportunities for economic prosperity growth and happy people’s life. The findings revealed that there is a reduction of non-performing loans in the credit section. by responses of 69% of the respondents strongly agreed, 17% of the respondents agreed while 4% disagreed and 10% strongly disagreed respectively. According to Watkins (2011), ethical standards in the financial institutions help one to achieve his targets. He argues that banking is a typical capitalist activity aimed to gain profits. The findings revealed that there is increase in the number of customers in the bank by responses 71% of the respondents who strongly agreed, 10% agreed while 12% disagreed and 7% strongly disagreed in that regard. Therefore, Chatterjee and Lefcovitch (2009), uncovered the importance of financial performance in Centenary bank, as every person achieves the targets through involving in predominantly oriented to maximizing profits, and behave totally ruthlessly in their operations against depositors, investors and general public interests. The findings revealed that, there is increase in the number of interests paid back by customers as indicated by responses 58% of the respondents who strongly agreed, 17% agreed 13% disagreed \\ilule 12%.

39 According to Heffernan & Fu (2010), found that some financial ratios significantly influenced financial performance thus a larger bank asset to GDP ratio and a lower market concentration ratio lead to lower margins and profits. The findings revealed that, there is increase in the number of accounts opened in centenary bank compared to the previous periods.as per responses of 54% of the respondents who strongly agreed, 19% agreed 15% disagreed while 12%. According to Northoctt (2004), there is a long held view that market power is necessary to ensure stability in banking. Banks that are profitable and well-capitalized are best positioned to withstand shocks to their balance sheet. Hence banks with market power, and the resulting profits, are considered to be more stable which leads to increase in number of accounts opened in Centenary bank Mukono branch Northoctt (2004). Financial performance of Centenary bank, Mukono district indicated that, there is increase in the number of customers in the bank with the respondents who strongly agreed 71% and those who agreed with the response of 58% who strongly agreed because profits have been increasing compared to the previous years. Thus there is increase in the number of interests paid back by customers with 58% as a result, experiences high output, and productivity hence leading to effectiveness of service delivery.

4.6.1 Regression analysis Table 11: 4.10 Model summary

Model R R square Adjusted square Std.Error 1 .892(a) .796 .761 .2467 Source: Primary Data 2019

Adjusted R squared is coefficient of determination which tells us the variation in the dependent variable due to changes in the independent variable, from the findings in the above table the value of adjusted R squared was 0.761 an indication that there was variation of 76.1% on financial performance of Centenary bank in Mukono branch due to changes in respect, integrity and customer focus at 95% confidence interval. This shows that 76.1% changes in financial performance of Centenary bank in Mukono branch could be accounted for by respect, integrity and customer focus. R is the correlation coefficient which shows the relationship between the

40 study variables, from the findings shown in the table above there was a strong positive relationship between the study variables as shown by 0.892.

Table 12: 4.11 ANOVA

Model Sum of df Mean F Sig. squares square Regression 0.896 4 .224 2.213 .012(a) Residual 5.184 48 .108 Total 6.08 52 Source: Primary Data 2019

From the ANOVA statistics in table above, the processed data, which is the population parameters, had a significance level of 0.0 12 which shows that the data is ideal for making a conclusion on the population’s parameter as the value of significance (p-value) is less than 5%. The calculated value was greater than the critical value (1.699 <2.213) an indication that respect, integrity and customer focus significantly influence financial performance of Centenary bank in Mukono branch. The significance value was less than 0.05 and indication that the model was statistically significant.

Table 13: 4.12 Coefficients

Model Unstandardized Standardized t Sig. coefficients coefficients B Std.Error Beta (Constant) .218 .141 1.608 .039 Respect .239 .165 .205 1.653 .029 Integrity .392 .271 .027 1.087 .032 Customer .284 .157 .413 1.852 .012 focus Source: Primary Data 2019

From the data in the above table the established regression equation was

Y= 0.218+0.239 x1+0.392 X2+0.284 x3

From the above regression equation it was revealed that holding respect, integrity and customer focus to a constant zero, financial performance of Centenary bank in Mukono branch would be 0.218, a unit increase in client appraisal would lead to increase in performance of Centenary

41 bank in Mukono branch by a factor of 0.239, a unit increase in integrity would lead to increase in performance of Centenary bank in Mukono branch by a factor of 0.3 92 and also unit increase in customer focus would lead to increase in performance of Centenary bank in Mukono branch by a factor of 0.284.

The study also found that all the p-values were less that 0.05 an indication that all the variables were statistically significant in influencing financial performance of Centenary bank in Mukono branch.

4.7 Interpretation of Findings From the findings as shown in Table 4.10, the value of adjusted R squared was 0.76 1 and indication that there was variation of 76.1% on financial performance of Centenary bank in Mukono branch due to changes in respect, integrity and customer focus at 95% confidence interval. R is the correlation coefficient which shows the relationship between the study variables, there was a strong positive relationship between the study variables as shown by 0.892.

From research finding as shown on Table 11, the calculated value was greater than the critical value (1.699 < 2.2 13) an indication that respect, integrity and customer focus significantly influence financial performance of Centenary bank in Mukono branch. The significance value was of 0.012 which was less than 0.05 and indication that the model was statistically significant.

The regression equation established from table 12 indicated that that holding respect, integrity and customer focus to a constant zero, financial performance of Centenary bank in Mukono branch would be 0.218 , a unit increase in respect would lead to increase in performance of Centenary bank by a factor of 0.239, a unit increase in integrity would lead to increase in performance of Centenary bank by a factor of 0.392 and also unit increase in customer focus would lead to increase in performance of Centenary bank by a factor of 0.284,The significance of the variables was supported by the t values whose significance values were less than 0.05 which indicates that the variables were statistically, significant in influencing financial performance of Centenary bank in Mukono branch.

42 CHAPTER FIVE SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction This chapter presents the discussion of key data findings, conclusion drawn from the findings highlighted and recommendations made there-to. The conclusions and recommendations drawn were focused on addressing the objective of the study. The researcher had intended was to establish the relationship between ethical standards and financial performance of banking institutions in Mukono District.

5.2 Summary of findings and interpretation The objective of the study was to determine the relationship between respect and financial performance of centenary bank in Mukono branch. From the analysis, financial performances of banking institutions have employed Ethical standards. The study revealed that Centenary bank, Mukono branch use respect in integrity to a great extent. Further it established that respect is a viable strategy for ethical standards, Aspects of ethical standards are considered while appraising clients, and failure to assess customer’s capacity to repay results in loan defaults, respect considers the character of the customers seeking credit facilities and that Centenary bank, Mukono branch have competent personnel for carrying out respect. The study established that Centenary bank use integrity in ethical standards to a great extent. Objective one

The findings on the first objective provided to find to determine the relationship between respect and financial performance of centenary bank in Mukono branch. It was noted that respect to each member of the staff in the bank was valued with the percentage of 67% and customer respect is given the first priority in the financial performance of centenary bank with the percentage of 65% who strongly agreed. Thus it had a positive response. Objective two

The second research objective was to determine the relationship between integrity on financial performance of centenary bank in Mukono branch indicated a positive effect that integrity helps in the growth of centenary bank to perform its services with the respondents who strongly agreed

43 69% and those who agreed with the response of 17% indicates that honesty in the banking sector of centenary bank, Mukono branch as a result, experiences high output, and productivity hence leading to effectiveness of service delivery.

Objective three

The finding on the third research objective was to examine the relationship between customer focus and financial performance of centenary bank in Mukono branch. The summary findings also revealed that, customer focus affects the profitability of financial performance of centenary bank which have helped to achieve the set goals and objectives with the percentage of 69% which in return helps in attracting potential and customer focus is limited by the borrower’s from borrowing with the percentage of 58% who strongly agreed.

The findings of the study showed that the downfalls of banks are usually caused by bad-risk investments. In this process, expectations of extremely high profit have a dazzling effect on bank managers and selfish interests of banks dominate in their proceedings.

This is due to unethical behaviors which have been cited as a major cause of financial problems coupled with the misuse of fraud and forgery, bribery, customer discrimination, power pressure, lying and cheating, masterminding banks robbery, spreading negative information, breaching personal secrecy and money laundering which has led to winding up of some banking institutions

Other factors that affect the profitability of firms argue that a high rate of integrity is extremely important in retail banking because it represents the only form of differentiation from competitors. Through a positive change in leadership and corporate culture, positive changes in satisfaction and thus profitability of individual customers can be expected.

Most of the respondents were unsatisfied with the financial performance of banking institutions thus banks were predominantly oriented to maximizing profits, and behave totally ruthlessly in their operations against depositors, investors and general public interests thus its revealed that it is difficult to avoid emphasizing employee to evaluate ethical aspects.

44 Dependent variable Financial performance Financial performance of Centenary bank, Mukono district indicated that, there is increase in the number of customers in the bank with the respondents who strongly agreed 71% and those who agreed with the response of 58% who strongly agreed because profits have been increasing compared to the previous years. Thus there is increase in the number of interests paid back by customers with 58% as a result, experiences high output, and productivity hence leading to effectiveness of service delivery.

5.3 Conclusion Having gone through this topic it is reasonable to conclude that though Ethical standards for financial market consists the fact that financial markets operate with money of other owners and risk may generate profit as well as loss. A risk which is too high must be minimized for two reasons: it must be maintained by confidence in investment and the undertaken risk may not mean a dangerous investment. For example client satisfaction with a branch (i.e. the speed of service, access of each employee, privacy, and opening hours); economic satisfaction (fees, interest); satisfaction with the i’emote access (i.e. the level of c-banking), and availability of ATMs. Constructing appropriate indicators and setting appropriate ethical standards for financial market was challenging. It requires extensive analysis of profit margins that satisfied customers are very important for current and future performance of commercial banks. On the other hand, if the ethical standards are poor, financial performance of centenary bank will be unsatisfactory. Based on the data analysis in this study, financial performance of banking institutions have relied heavily on the guarantor as the main factor of mitigating ethical standards.

In the first objective, a survey of Uganda’s banking institutions indicated that, the cases show the discrepancy between official statements and proceedings of top management. According to (Chatterjee and Lefcovitch 2009), banks are predominantly oriented to maximizing profits, and behave totally ruthlessly in their operations against depositors, investors and general public interests thus its revealed that it is difficult to avoid emphasizing employee to evaluate ethical aspects.

45 in the second objective, was to determine the relationship between integrity on financial performance of centenary bank in Mukono branch. In the second objective, a survey of Uganda’s banking institutions indicated that honesty in the banking sector of centenary bank, Mukono branch as a result, experiences high output, and productivity hence leading to effectiveness of service delivery. According to Watkins (2011), ethical standards in the financial institutions help one to achieve his targets. He argues that banking was a typical capitalist activity aimed to gain profits.

The finding on the third research objective was to examine the relationship between customer focus and financial performance of centenary bank in Mukono branch. This indicated that customer focus customer focus affects the profitability of financial performance of centenary bank have helped to achieve the set goals and objectives. He further asserts that this information attracts potential and customer focus is limited by the borrower’s from borrowing huge credits which in return may fail to return.

5.4 Recommendations The researcher made the following recommendations as a way of reducing the challenges of unethical behaviors which have been cited as a major cause of financial problems coupled with the misuse of fraud and forgery, bribery, customer discrimination, power pressure, lying and cheating, masterminding banks robbery, spreading negative information, breaching personal secrecy and money laundering which has led to winding up of some banking institutions should find a way of inquiry on ethical standards of banking institutions to implement orders to enhance financial discipline so that government funds and resources can be efficiently and effectively used.

Based on the findings made from this research study, the following recommendations are therefore made: Discussion of ethical issues in staff meetings should be practiced in the various banks. When this is done, the staff or workers of the bank are generally abreast with the ethical standards needed by the bank and will adhere to it. The tendency to forget about the standards is there so constant reminders thorough staff meetings will do the workers a lot of good.

46 From the research, most of the staff believes that the banks do not have a dedicated person or department to oversee ethical issues. Since the work has proven that ethics have a positive impact on the performance of the banks in terms of achieving its goals, it is suggested that a dedicated person or department to take charge and facilitate the ethical related issues in the bank to further boost the banks performance in achieving its goals.

Overall, ethical standards n~ust be upheld since it plays a major role in the bank achieving its goals and aims. The work has proven that that ethics impact positively on the performance of the bank in terms of achieving its goals. Therefore the banks must take a critical look at ethics in order to ensure workers in general, that is from management to the lowest rank should conform to the ethical standards of the bank.

The compliance dimension in the ethical practice of the bank’s is the highest contributor to the performance of the bank in terms of achieving its goals. It is therefore recommended that, there should be an improvement in the items that forms that dimension. This will ensure greater contribution to the bank achieving its performance goals.

However all other dimensions must be improved since they contribute to the performance of the banks with respect to achieving its goals? The dimensions are honesty and integrity, social responsibility and transparency.

The banks should undertake self-assessment of their compliance to the code of ethics periodically and in order to achieve honest and complete answers to these questions, the banks should arrange for their own assessments to be contributed to and challenged by key stakeholders or partners (for example, unions , service users) and regulators. This should be an exception and not a rule.

5.5 Limitation of the study The respondents approached are likely to be reluctant in giving information fearing that the information sought would be used to intimidate them or print a negative image about them or their banking institution. Some respondents may even turn down the request to fill questionnaires. The study handled the problem by carrying an introduction letter from the University and assuring them that the information they give would be treated confidentially and it would be used purely for academic purposes.

47 Employees operate on tight schedules; respondents are not able to complete the questionnaire in good time and this might overstretch the data collection period. To mitigate this limitation, the study made use of network to persuade targeted respondents to fill up and return the questionnaires.

The researcher also encountered problems in eliciting information from the respondents as some of the information required was subject to areas of feelings, emotions, attitudes and perceptions, which cannot be accurately quantified and/or verified objectively. This might lead to lack of response due to the veil of confidentiality surrounding the Finance institutions. The researcher encouraged the respondents to participate without holding back the information they might be having as the research instruments would not bear their names.

5.6 Areas for further research The study sought to establish the relationship between ethical standards and financial performance of banking institutions in Mukono District.

Further research is recommended on the effect of Ethical standards Reference Bureaus on loan performance in Centenary bank, Mukono District.

Further research should also be done on the relationship between ethical standards and nonperforming loans on financial Institutions in Uganda and on the reasons for loan default in financial organizations from the clients’ perspective.

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54 APPENDICES APPENDIX I: QUESTIONNAIRE Dear respondent,

I Lukowe Keludia Reg.No. 1163-05014-07715 a student of Kampala International University undertaking a Bachelor’s Degree of Business Administration. Currently am carrying out a research study on the Ethical standards and financial performance of banking institutions. A case study of Centenary bank Mukono branch as part of the requirements for a ward of Bachelor’s Degree of Business Administration. This questionnaire is therefore intended to seek information on the above subject matter. The information is purely for academic purposes and all the answers will be handled with utmost confidentiality. I therefore humbly request that you complete this questionnaire correctly in the spaces provided or options given, (Please, tick the appropriate answers where options are given).

SECTION A Demographic characteristics of respondents 1. Sex of respondents Male Female

2. Age of respondent Age 18-29 years 30-39 years 40-49 years 49 & above years 3. Highest Level of education

O’Level & Below A’ Level Diploma Degree Postgraduate

55 4. Marital Status.

Married Single Divorced Widow Widower

5. Period of stay in the company

Less than 1 year

1-3 years

4-6 years Above 7 years

56 SECTION B: Respect Please evaluate the following statements by ticking under the appropriate figure basing on the scale below: Strongly Neither agree Strongly Questions Agree Disagree agree nor disagree disagree Respect Questions to bank Customer respect is given the first priority in the financial performance?

Your respect in the bank motivates more customers to centenary bank?

You respect customers behavior at all times? You respect the views of others even if they are different? You respect each member of the staff in the bank? Respect affects the financial performance of centenary bank?

57 SECTION C: Integrity

Evaluate the following statement by circling the appropriate response basing on the scale below. Please do not leave any item unanswered.

Code 1 2 3 4 5

Status Strongly Disagree Not Agree Strongly 1 2 3 4 5 disagree sure agree rr44

A Integrity

1. Integrity is profitable to the members in the financial performance?

2. Integrity affects the performance centenary bank?

3. Integrity helps in the growth of centenary bank to perform its services. 4. Integrity is effective in financial performance of centenary bank? 5. Integrity helps in the management of the business? 6. Integrity has strongly helped in the financial performance of centenary?

58 SECTION D: Customer focus

Please evaluate the following statements by ticking under the appropriate figure basing on the scale below: Strongly Neither Strongly Customer focus Agree Disagree agree of all disagree Questions to bank Is customer focus limited by the borrower’s from borrowing? Customer focus helps in the growth of the financial performance? Customer focus plays a vital role in the financial performance of Centenary bank. Customer focus has strongly helped in the effectiveness of financial performance in centenary bank? Customer focus is helpful in the growth financial performance of the business? Customer focus affects the profitability of financial performance of centenary bank?

59 SECTION E: FINANCIAL PERFORMANCE

Please evaluate the following statements by ticking under the appropriate figure basing on the scale below: Strongly Neither Strongly Dependent variable Agree Disagree agree of all disagree Questions to bank Profits have been increasing compared to the previous years. There is reduction of bad debts in the previous periods. There is a reduction of non-performing loans in the credit section. There is increase in the number of customers in the bank. There is increase in the number of interests paid back by customers. There is increase in the number of accounts opened in centenary bank compared to the previous periods.

60 V A U D A A Ogaba Road, Kansanga* F’O BOX 20~J0 Kampata, Uganda r’.i-uvir I~L~1-~ Tet: ÷256 777 295 599, Fax: +256 (0) 41 - 501 974 NTERNATI ONAL E-mail: rnugurnet~grnaiI.com, UNIVERSITY

COLLEGE OF ECONOMICS AND MANAGEMENT DEPARTMENT OF ACCOUNTING AND FINANCE

23~/O5/2O19

To whom it may concern Dear Sir/Madam,

RE: INTRODUCTORY LETTER FOR LUKOWE KELUDIA 1163~05014~ 07715

This is to introduce to you the above named student, who is a bonafide student of Kampala International University pursuing a Bachelor’s Degree in Business Administration Accounting and Finance, Third year Second semester.

The purpose of this letter is to request you avail her with all the necessary assistance regarding her research.

TOPIC: - ETHICAL STANDARDS AND FINANCIAL PERFORMANCE OF BANKING INSTITUTIONS

CASE STUDY: CENTENARY BANK, MUKONO BRANCH

Any information shared with her from your organization shall be treated with utmost confidentiality.

We shall be grateful for your positive response.

Yours truly,

~ KIRABO

— AdCOU~ING AND FINANCE 07Z2~23344