Effects of Corporate Governance Mechanisms on Financial Performances of Selected Government and Private Commercial Banks in Ethiopia
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Date
2026-06-23
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Addis Ababa University
Abstract
This study aims at examining the effects of corporate governance mechanisms on financial performances of selected government and private commercial banks in Ethiopia 2010-2023 with a sample of ten Ethiopian commercial banks. The study assessed the relationship between selected corporate governance variables, and bank performance as measured by ROA, ROE and NIM. Corporate governance variables considered in this study includes Board Meeting, Existence of sub-committee, Total Meting per Year, Size of the Board of Directors, Experience on Financial Sector, Size of the bank, Bank Age, Number of Female Directors, Educational Qualification, of the banks. Explanatory research design was employed to establish the causal relationship between corporate governance and performance measure variables. The study uses both primary and secondary source of data .Primary data was collected using questioner which is completed by board secretary and senior management of the sample commercial banks as they were in better position to comment on corporate governance issues and the secondary data was collected from the National bank of Ethiopia. The study utilizes panel data, fixed effect and random effect model analysis methodology by using SPSS and STAT software in drawing conclusion about the study. The findings reveal that while board members with financial sector experience positively affect ROA, while board size negatively affects both ROA and NIM. Educational qualification positively affects ROE and the existence of sub-committees positively affects NIM. Bank size and bank age were also significant determinants across various performance measures. Gender diversity, meeting frequency, and total meetings per year were found to be statistically insignificant. The study concludes that effective corporate governance mechanisms particularly financial sector experience, optimal board size, sub-committee existence, and board education significantly enhance bank financial performance; though not all governance variables are equally relevant. Based on these findings, the study recommends that Ethiopian commercial banks prioritize recruiting board members with financial sector experience, maintain moderate board sizes, strengthen sub-committee functions, and reform regulatory policies. The study also recommends that the National Bank of Ethiopia enhance governance guidelines to promote gender diversity and meeting effectiveness.
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Corporate Governance, Financial Performance, Commercial Banks and Ethiopia