The Effect of Corporate Governance on Financial Performance of Insurance Companies in Ethiopia
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Date
2025-02-27
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Publisher
AAU
Abstract
Corporate governance refers to the system of rules, practise and processes by which a company
is directed and controlled. It essentially involves the balancing of many interests. The objective
of this study was to examine the connection between company governance instruments and the
financial performance of Ethiopian insurers. Out of the entire of eighteen insurers which are
functioning within Ethiopia, eight insurers were selected using purposive sampling. The study
employed return on assets as a dependent variable including the size of the board, the frequency
of board meetings, gender diversity in the board of directors, experience of the board of
directors in the sector, their educational qualifications and the size of the audit committee are
considered as independent variables. To attain stated objectives of the explanatory type and
descriptive of research design with a mixed method employed. The primary data was gathered
via designed surveys by using questionnaires tool filled by the executives as they were aware
of the governance system in corporations. The secondary data was gathered from the National
Bank of Ethiopia's annual performance Report. The study employed a panel data analysis
procedure in drawing inferences. The results display that the size of the board, gender diversity
in the board of directors and the size of the audit committee had significant and negative
influences on the financial performance of Ethiopian insurers. Conversely, the frequency of
board meetings, the prior exposure to the insurance sub-sector and the qualifications of board
members regarding educational status had a significant and positive effect on Ethiopian
insurers.