Effect of Corporate Governance on Financial Performance of Insurance Companies in Ethiopia
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Date
2019-06-09
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A.A.U.
Abstract
This study examines the relationship between corporate governance and financial performance of Insurance companies in Ethiopia. Good corporate governance enhances ethical behavior of those that wield corporate power. Specifically, this study examined Board diversity, Board meetings, Board Committee, Board size, and Board independence and their relationship with financial performance, as measured by return on assets, of insurance companies in Ethiopia. The study comprised of 13 insurance companies out of 17 licensed companies by Regulatory Authority, NBE during the period 2015 to 2018. The four insurance companies left over were stagnant in their growth and considered less important to influence the study. The study employed multiple linear regression analysis. The data is collected from secondary sources as it is obtained from the firm’s financial reports and NBE. The data is cleaned for completeness, coded and analyzed by the use of Statistical Package for Social Sciences (SPSS) for analysis.
Overall multiple linear regression models were tested using ANOVA and the result obtained from the Model is significant at 95% significance level. To increase overall performance of the insurance industry In Ethiopia, the study recommends that stakeholders of the industry should take into account the board Size, frequency of board meeting, board committees and board independency when forming board of directors as they are significant determinants of financial performance. Further recommendations and future studies are forwarded.