The Effect of Corporate Governance on the Performance of Private Commercial Banks in Ethiopia
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Date
2007-05
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Addis Ababa University
Abstract
The paper looked at the effects of corporate governance on the financial performance of private commercial banks in Ethiopia. This explanatory study sought to analyze the effect of different corporate governance mechanisms, particularly board size, variety number of internal board sub-committee and meeting frequency on the financial performance of 7 privately owned commercial banks of Ethiopia. The financial performance measure was Return on Asset (ROA). In order to achieve this objective, the study used quantitative research approach that is by adopting quantitative method research approach by documentary analysis of secondary data which was collected from the National Bank of Ethiopia (NBE). And capturing and administrating primary data using unstructured questionnaire which were completed by board secretary and delegated staffs as he/she is in a better position to comment on corporate governance affairs. Panel data covering 13year period from 2004-2016 was analyzed and regression result with recommendation are displayed for the selected 7 private commercial banks. The cross section fixed effect technique has been applied to find out the most significant variables from considered corporate governance variables. The findings indicated that Board size and variety, number of internal board sub-committee had statistically significant negative effect on private commercial bank financial performance and board meeting frequency is negatively insignificant on banks performance. When number of board members and variety number of internal board sub-committee increase, ROA will decrease and there should be optimal number of both. Meeting frequency of board members is insignificant to ROA. Future researchers need to focus on these significant variables and additional corporate governance mechanisms.
Keywords: Banking Sector, Private Commercial Bank, Financial Performance, Corporate Governance.
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Keywords
Banking Sector, Private Commercial Bank, Financial Performance, Corporate Governance.