Corporate Governance in the Ethiopian Financial Sector

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title




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.



Corporate Governance, Ethiopian Financial Sector.