Abstract:
Corporate governance is the structure by which the organizations are managed and controlled.
Good corporate governance facilitates the effective monitoring of the board and the management
activities. It concerns a set of formal association between a company’s management, its
shareholders and other stakeholders. To underscore the need for corporate governance as a
veritable tool,for improved banking sector performance in Ethiopia, the study aimed to examine
the Impact of corporate governance on financial performance of selected private commercial
banks in Ethiopia. Explanatory approach design was utilized to setup the causal relationship
between corporate governance and return over asset. The study used panel data in examining the
effects of corporate governance on financial performance which is collected data from ten private
banks for nine consecutive years from 2011-2019. To estimate the impact of corporate governance
on private commercial banks financial performance in Ethiopia the following correlation and
general panel data regression or research model was developed. Simple correlation was used to
see association between return on asset and factors in this study. In addition, multiple linear
regressions used to measure the effects of corporate governance on financial performance of
private commercial banks. The dependent variable, financial performance, is measured in terms
of return over asset. Board gender diversity, Educational qualifications of directors, Audit
committee size, Board meeting frequency, as a proxy of corporate governance has positive but
insignificant relationship with the private commercial bank financial performance. Regression
result revealed that board size, deposit ratio, liquidity ratio and ROA have positive and significant
effect on ROA. Board ownership as a proxy of corporate governance has negative but insignificant
relationship with the private commercial bank financial performance, while the capital of the
private commercial bank is an important factor with a positive contribution to its profitability. It
is recommended to that appropriate strategy and policies need to be adopted to improve the
balance of boards in Ethiopian banks with a great care about their qualification and competency,
audit committee size, minimum capital requirements.
