Assessment of Corporate Governance for Ipo Readiness: The Case in The Ethiopian Financial Sector
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Date
2025-09
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Addis Ababa University
Abstract
This study examines corporate governance within Ethiopia's financial sector, with a specific focus on the context of initial public offerings (IPOs). Effective governance is essential for maintaining company integrity and operational efficiency, as it helps build long-term value for stakeholders by establishing clear regulations, ensuring accountability, and fostering transparency. An IPO signifies a company’s shift from private to public ownership, which can be successfully navigated through robust governance practices and examines key factors, including board structure and diversity, the educational background of board members concerning IPOs, clarity in financial reporting, risk assessment strategies, the effectiveness of audit committees, and corporate social responsibility initiatives. These elements are all critical for assessing the readiness of public companies in Ethiopia. To conduct this analysis, a combination of quantitative and qualitative methods was utilized within a descriptive framework. Data was gathered from both primary and secondary sources using structured and open-ended questionnaires, as well as published materials. The sampling technique involved selecting 22 banks from a pool of 32 operational banks, intentionally excluding new entrants, commercial, and development banks. Additionally, the study included 17 out of 18 insurance companies, with the Ethiopian Insurance Corporation and the Commercial Bank of Ethiopia omitted from the sample due to a strategic policy decision, rather than any governance-related issue tied to their IPO readiness. The analysis of microfinance institutions concentrated on the top 10 organizations with the strongest capital bases, using performance metrics such as return on equity and revenue growth over the past five years. The data analysis involved descriptive statistics, including frequency counts, percentages, tables, mean scores, and standard deviations, using SPSS version 27. The findings revealed that several areas received moderate ratings, underscoring a need for strategic enhancements in corporate governance practices. These improvements are crucial for enhancing IPO readiness in Ethiopia’s financial sector, ensuring that organizations are well-prepared to navigate the complexities of going public and meet the expectations of prospective investors
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Financial Sector, Corporate Governance, Initial Public Offering