The Impact of Corporate Governance on Firm’s Performance: Evidence from Ethiopian Insurance Companies

Abstract

The issue of corporate governance has long been ignored in developing economies like Ethiopia. To fill the gap, this study examines the impact of corporate governance mechanisms on the performance of Ethiopian insurance Companies using a panel data model for the period covering from 2009 to 2013.Both descriptive and regression analyses were conducted on the selected samples of 10 insurance companies out of 15 operating in the market. The findings from the study indicated that board meeting and board compensation had statistically significant positive impact on return on equity (ROE) of the Ethiopian insurance Industry. But the results failed to show any significant impact of board size, audit committee, and gender diversity on the proxy of companies’ performance. Moreover, the Size of the companies had a significant positive impact on ROE, but the Age of the firms did not reveal any significant impact on ROE. Hence, the study recommends that efforts to improve the corporate governance system of insurance companies in Ethiopia should focus on the number of meetings to be held by directors, the level of board compensation, as well as on the size of firms, and these in turn improve the performance of the insurance companies. Finally, the study also recommends the participation of all stakeholders in the industry at the time of developing the governance system of these companies.

Keywords: Corporate Governance, Corporate Governance Mechanisms, Performance,