Corporate Governance in the Ethiopian Financial Sector
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Date
2008-10
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A.A.U
Abstract
This study investigates the practices of corporate governance in the
financial services sector of Ethiopia. The paper encompasses in-depth
literature survey of corporate governance mechanisms focusing on Board
of Directors as an internal control mechanism. The Ethiopian financial
sector is studied in some detail and corporate governance practices in
the sector are analyzed using primary data collected from all banks and
insurances in Ethiopia. Furthermore, econometric evidence is provided
by exploring eight commercial banks in Ethiopia for five years.
Specifically, this paper traces the relationship between firm
performance and board characteristics applying 3SLS (the three-stage
least squares) regression analysis on random effect model. The results
found are similar to the previous findings. First, the result for board size
supports the traditional view that higher performance is recorded for
firms with relatively smaller board size. Secondly, the discussion of board
composition does not show any beneficial effect of having female
directors on the board. Thirdly, this study provides evidence consistent
with the positive effect of frequent board meetings on firm performance.
Fourthly, firms that have an internal auditor with direct access to the
board perform relatively better. Lastly, the study finds that ownership
type matters for performance; those commercial banks that are owned by
shareholders score relatively better financial performance than
government-owned commercial banks.
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Keywords
Corporate Governance, Ethiopian Financial Sector.