The The Effect of Corporate Governance on Financial Performance: Evidence from Commercial Banks in Ethiopia

Abstract

The main objectives of this study to examine the effect of corporate governance on financial performance of commercial banks in Ethiopia during the period 2015-2020. The study was employed explanatory types research design. Return on asset (ROA) was used to a measurement of the financial performance of the banks. The study employed both primary and secondary source of data. Secondary data was obtained from audited financial statement of the bank during the period of 2015-2020 from National Bank of Ethiopia (NBE). And primary data was collected through self-administered questionaries that distribute to the board secretary of each bank. The target group of the studies were incorporate all (17) commercial bank operated in the country during the period of the study. The studies found that CEO tenure and recruitment of CEO internally were positive and significant effect on financial performance and board meeting frequency, legal reserve ratio and leverage have negative and significant effect on financial performance of the bank. While board size, board gender diversity and bank sizes have negative but insignificant effect on return on asset. On the other hand, depositor influence has positive and insignificant. Accordingly, the study concludes that Ethiopian commercial banks’ need to give a due attention on the meeting frequency of board director, hiring of CEO internally and CEO tenure to improve their financial performance