IDEAS home Printed from https://ideas.repec.org/a/vls/finstu/v23y2019i1p6-24.html
   My bibliography  Save this article

The Impact Of Corporate Governance Mechanisms On The Performance Of Commercial Banks: The Case Of Private Banks In Ethiopia

Author

Listed:
  • YIHUN, Wondimeneh Asrat

    (National Bank of Ethiopia, Addis Ababa, Ethiopia)

  • KOLECH, Abiy Getahun

    (Department of Accounting and Finance, Jimma University, Ethiopia)

  • TOLE, Million Gizaw

    (Department of Accounting and Finance, Jimma University, Ethiopia)

Abstract

This study seeks to see the level of impacts that different corporate governance mechanisms has on financial performance of banks in Ethiopia. Explanatory research design was used in establishing the casual effect relationship between corporate governance variables and banks financial performance measures. Secondary data were collected from the banks’ annual reports and the NBE. The study utilized panel data analysis methodology in drawing conclusion about the study covering ten-year period from 2006-2015. The fixed effect model was applied to allow heterogeneity among 7 banks. The regression results show that presence of female directors and industry specific experience of directors has positive and significant effects on financial performance of private banks while number of board committees has significant negative effects on bank performance. The study results implied that stakeholders should give prior considerations to the presence of female directors and industry specific experience of directors when they set governance policy for industry in general and for the bank in particular.

Suggested Citation

  • YIHUN, Wondimeneh Asrat & KOLECH, Abiy Getahun & TOLE, Million Gizaw, 2019. "The Impact Of Corporate Governance Mechanisms On The Performance Of Commercial Banks: The Case Of Private Banks In Ethiopia," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 23(1), pages 6-24, March.
    • Handle: RePEc:vls:finstu:v:23:y:2019:i:1:p:6-24
    as

    Download full text from publisher

    File URL: http://www.icfm.ro/RePEc/vls/vls_pdf/vol23i1p6-24.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arosa, Blanca & Iturralde, Txomin & Maseda, Amaia, 2010. "Ownership structure and firm performance in non-listed firms: Evidence from Spain," Journal of Family Business Strategy, Elsevier, vol. 1(2), pages 88-96, June.
    2. Guest, Paul M., 2008. "The determinants of board size and composition: Evidence from the UK," Journal of Corporate Finance, Elsevier, vol. 14(1), pages 51-72, February.
    3. Shijun Cheng & John Evans & Nandu Nagarajan, 2008. "Board size and firm performance: the moderating effects of the market for corporate control," Review of Quantitative Finance and Accounting, Springer, vol. 31(2), pages 121-145, August.
    4. Khaled Aljifri & Mohamed Moustafa, 2007. "The Impact of Corporate Governance Mechanisms on the Performance of UAE Firms: An Empirical Analysis," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 23(2), pages 71-93, December.
    5. Roszaini Haniffa & Mohammad Hudaib, 2006. "Corporate Governance Structure and Performance of Malaysian Listed Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7-8), pages 1034-1062.
    6. Roszaini Haniffa & Mohammad Hudaib, 2006. "Corporate Governance Structure and Performance of Malaysian Listed Companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 1034-1062, September.
    7. Niclas L. Erhardt & James D. Werbel & Charles B. Shrader, 2003. "Board of Director Diversity and Firm Financial Performance," Corporate Governance: An International Review, Wiley Blackwell, vol. 11(2), pages 102-111, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thanh Tiep Le & Abhishek Behl, 2022. "Role of corporate governance in quick response to Covid-19 to improve SMEs’ performance: evidence from an emerging market," Operations Management Research, Springer, vol. 15(1), pages 528-550, June.
    2. Nebyu Adamu Abebe & Navkiranjit Kaur Dhaliwal, 2024. "An empirical investigation of corporate governance attributes and firm performance: evidence from the ethiopian insurance industry," SN Business & Economics, Springer, vol. 4(10), pages 1-25, October.
    3. Stefan Milojević & Marko Milašinović & Aleksandra Mitrović & Jasmina Ognjanović & Jelena Raičević & Nebojša Zdravković & Snežana Knežević & Malči Grivec, 2023. "Board Gender Diversity and Banks Profitability for Business Viability: Evidence from Serbia," Sustainability, MDPI, vol. 15(13), pages 1-16, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, February.
    2. C. José García Martín & Begoña Herrero, 2018. "Boards of directors: composition and effects on the performance of the firm," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 31(1), pages 1015-1041, January.
    3. Ali Uyar & Cemil Kuzey & Merve Kilic & Abdullah S. Karaman, 2021. "Board structure, financial performance, corporate social responsibility performance, CSR committee, and CEO duality: Disentangling the connection in healthcare," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(6), pages 1730-1748, November.
    4. Tuan Nguyen, 2017. "Do Female Directors Add Value?," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(3), pages 169-177, JUNE.
    5. Detthamrong, Umawadee & Chancharat, Nongnit & Vithessonthi, Chaiporn, 2017. "Corporate governance, capital structure and firm performance: Evidence from Thailand," Research in International Business and Finance, Elsevier, vol. 42(C), pages 689-709.
    6. Sultan Altass, 2021. "The Impact of Audit Committee Effectiveness on Corporate Performance – Evidence from Saudi Arabia," RAIS Conference Proceedings 2021 0118, Research Association for Interdisciplinary Studies.
    7. Nguyen, Tuan & Locke, Stuart & Reddy, Krishna, 2014. "A dynamic estimation of governance structures and financial performance for Singaporean companies," Economic Modelling, Elsevier, vol. 40(C), pages 1-11.
    8. Low, Daniel C.M. & Roberts, Helen & Whiting, Rosalind H., 2015. "Board gender diversity and firm performance: Empirical evidence from Hong Kong, South Korea, Malaysia and Singapore," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 381-401.
    9. Ali Meftah Gerged & Eshani Beddewela & Christopher J. Cowton, 2021. "Is corporate environmental disclosure associated with firm value? A multicountry study of Gulf Cooperation Council firms," Business Strategy and the Environment, Wiley Blackwell, vol. 30(1), pages 185-203, January.
    10. Holm, Claus & Schøler, Finn, 2008. "Reduction of Asymmetric Information through Corporate Governance Mechanisms : The Importance of Ownership Dispersion and International," Accounting Research Center Working Papers A-2008-02, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    11. Muhammad Hassan & Muhammad Rizwan, 2016. "Corporate Governance Under Multi- Theoretical Perspective," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 12(2), pages 68-86.
    12. Omer Bagais & Khaled Aljaaidi & Abdulaziz Alothman, 2021. "An Empirical Investigation of the Associations of Short and Long Debt Policies with Economic Values of Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 249-254.
    13. Pillai, Rekha & Al-Malkawi, Husam-Aldin Nizar, 2018. "On the relationship between corporate governance and firm performance: Evidence from GCC countries," Research in International Business and Finance, Elsevier, vol. 44(C), pages 394-410.
    14. Andy Cosh & Paul Guest & Alan Hughes, 2007. "UK Corporate Governance and Takeover Performance," Working Papers wp357, Centre for Business Research, University of Cambridge.
    15. Al-Najjar, Basil, 2014. "Corporate governance, tourism growth and firm performance: Evidence from publicly listed tourism firms in five Middle Eastern countries," Tourism Management, Elsevier, vol. 42(C), pages 342-351.
    16. Sahar E-Vahdati & Norhayah Zulkifli & Zarina Zakaria, 2018. "A Moderated Mediation Model for Board Diversity and Corporate Performance in ASEAN Countries," Sustainability, MDPI, vol. 10(2), pages 1-20, February.
    17. Nailesh Limbasiya & Hitesh Shukla, 2019. "Effect of Board Diversity, Promoter’s Presence and Multiple Directorships on Firm Performance," Indian Journal of Corporate Governance, , vol. 12(2), pages 169-186, December.
    18. Zsolt Lakatos, 2020. "Do larger boards improve shareholder value creation? – Effects of the board size on business performance in Eastern Central Europe," Society and Economy, Akadémiai Kiadó, Hungary, vol. 42(3), pages 245-279, September.
    19. Aziz Jaafar & Lynn Hodgkinson & Mao-Feng Kao, 2019. "Ownership Structure, Board of Directors and Firm Performance: Evidence from Taiwan," Working Papers 19011, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    20. Darmadi, Salim, 2010. "Do Women in Top Management Affect Firm Performance? Evidence from Indonesia," MPRA Paper 38743, University Library of Munich, Germany.

    More about this item

    Keywords

    agency theory; banks; financial performance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vls:finstu:v:23:y:2019:i:1:p:6-24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniel Mateescu (email available below). General contact details of provider: https://edirc.repec.org/data/cfiarro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.