Abstract:
This study examines the effect of corporate governance on financial performance of commercial banks in Ethiopia. The study was employed explanatory research design in order to establish the causal relationship between corporate governance variables and financial performance. This explanatory research seeks to analyze the effect of different corporate governance proxies, particularly board size, meeting frequency, gender diversity in board of director, CEO recruitment internally, CEO tenure, legal reserve ratio and depositor influence on financial performance of commercial banks in Ethiopia. And the study was controlling the effect of Bank size and leverage. Return on asset (ROA) was used to measurement of the financial performance of the banks. In order to achieve this objective, the study was 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). Those 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. As a result, the census approach was used in the research. The finding of this studies was indicated that board size, board gender diversity and bank size have negative but insignificant effect on return on asset. But, board meeting frequency, legal reserve ratio and leverage have negative and significant effect on financial performance of the bank., CEO tenure and recruitment of CEO internally were positive and significant effect on financial performance. On the other hand, depositor influence has positive and insignificant. Finally, the researcher was mainly recommended 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.
