Financial Performances and Bank Presidents Compensation Case of Ethiopian Commercial Banks

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Addis Ababa University


The purpose of this study is to examine theimpact of financial performances on presidents’ compensation in Ethiopian commercial banks. In light of this objective the study adopted mixed research approach using 8 commercial banks operate in Ethiopia.These banksare operatesin the industry for the last 10 years i.e. from 2004 up to 2013. Thus, the study used a total of 80 observations. The study used documentary reviews of annual reports and in-depth interviews to test stated research hypotheses and to answer the research questions. The data was mainly analyzed on quantitative basis using Eviews 6 software, OLS regression analysis. Further, arguments were made by the support of in-depth interviews.The results showed that performance of banks have no impact on president compensation of Ethiopian commercial banks. However, the result showed a significance negative relationship between ownership and president compensation. In addition, the study founds a positive significance relationship between bank size and president compensation. Furthermore, the study found a negative insignificance relationship between capital adequacy, inflation and president compensation.The study also found that one period lagged value of compensation is the main determinants of compensation. Thus, commercial banks in Ethiopia should give considerations for performance and inflation to align share holder interest with that of president. Keywords: performance, president compensation, ownership, bank size, capital adequacy ratio, inflation, lagged value and share holder interest



performance, president compensation, Ownership, Bank size, capital adequacy ratio, Inflation, Lagged value and share holder interest