Exploring the Impact of Corporate Governance on the Financial Performance of Private Banks in Ethiopia

Abstract

This study aimed to examine the impact of corporate governance on the financial performance of private banks in Ethiopia. Using descriptive statistics and panel regression analyses, the research focused on six selected private banks from 2016 to 2023. The findings from the descriptive statistics revealed slight differences in Return on Assets (ROA), with Awash International Bank achieving the highest ROA at 2.70%, while Abyssinia Bank recorded the lowest at 2.19%. Notably, all banks had positive ROA values, reflecting their ability to generate income from their assets. Awash International Bank’s strong performance highlights its effective asset management practices. For Return on Equity (ROE), Dashen Bank led with 22.50%, whereas Abyssinia Bank posted the lowest at 13.60%, showing Dashen Bank’s superior profitability and returns to shareholders. The panel regression analysis identified several significant factors affecting ROA, including firm age, management efficiency, CEO duality, and asset quality. For ROE, firm age, board size, management efficiency, CEO duality, and capital adequacy were influential. These factors are crucial determinants of profitability for private banks in Ethiopia.