The Effect of Corporate Governance on Intellectual Capital Performance of Commercial Banks in Ethiopia: An Analysis of Random Effects

Abstract

The purpose of this study was to empirically examine the effect of corporate governance mechanisms on intellectual capital performance of Ethiopian commercial banks using short panel data. The study crafted explanatory research design with a combination of secondary source of data collection, ex post control over variables, unbalanced panel with cross sectional and time dimension inclined with quantitative research approach. Besides, both financial and non-financial data of 14 commercial banks were used. Econometric model estimation procedures and diagnostic tests for classical linear regression model assumptions were also carried out. In fact, random effects regression model was selected as best fitted model over pooled OLS and fixed effect. Both descriptive statistics and regression analysis were also conducted.  As a result, empirical findings of the random effects GLS regression analysis indicated that gender diversity and profitability have statistically significant and positive effect on intellectual capital performance of commercial banks. On the other hand, board size has statistically significant and negative effect on intellectual capital performance. However, board remuneration and bank size failed to show statistically significant effect.

Keywords: Corporate Governance Mechanisms, Intellectual Capital, Random effects, Banks