Journal of Investment and Management

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Corporate Governance Mechanisms and Firm Performance: The Case of Ethiopian Insurance Industry

Received: 02 October 2015    Accepted: 20 October 2015    Published: 21 July 2016
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Abstract

In this study the effects of board characteristics (specifically proportion of outsiders in the board, board size, CEO-Chairman duality, and board meeting frequency), debt policy, and dividend policy are investigated in the Ethiopian context using two theories of corporate governance, which are agency theory and stewardship theory. Financial performance is measured using return on assets and return on equity. The study used panel data and Pooled OLS regression to analyze the relationship between corporate governance mechanisms and firm performance using a data set of 8 insurance companies of Ethiopia over the period 2008-2012. The results show that proportion of outside directors, board size, debt ratio, and ownership have a significant negative effect on performance of insurance companies. However, boards meeting frequency, firm size and firm age, are identified to have a significant positive impact on firm performance. Dividend policy have no effect on firm performance while the effect of CEO-Chairman Duality remains untested since it is not practiced in any one of the insurance companies.

DOI 10.11648/j.jim.20160502.11
Published in Journal of Investment and Management (Volume 5, Issue 2, April 2016)
Page(s) 6-16
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Board Characteristics, Corporate Governance, Financial Policies, Firm Performance, Ethiopia

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Author Information
  • Department of Accounting and Finance, Addis Ababa University, Addis Ababa, Ethiopia

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  • APA Style

    Asamnew Techan Demeke. (2016). Corporate Governance Mechanisms and Firm Performance: The Case of Ethiopian Insurance Industry. Journal of Investment and Management, 5(2), 6-16. https://doi.org/10.11648/j.jim.20160502.11

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    ACS Style

    Asamnew Techan Demeke. Corporate Governance Mechanisms and Firm Performance: The Case of Ethiopian Insurance Industry. J. Invest. Manag. 2016, 5(2), 6-16. doi: 10.11648/j.jim.20160502.11

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    AMA Style

    Asamnew Techan Demeke. Corporate Governance Mechanisms and Firm Performance: The Case of Ethiopian Insurance Industry. J Invest Manag. 2016;5(2):6-16. doi: 10.11648/j.jim.20160502.11

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  • @article{10.11648/j.jim.20160502.11,
      author = {Asamnew Techan Demeke},
      title = {Corporate Governance Mechanisms and Firm Performance: The Case of Ethiopian Insurance Industry},
      journal = {Journal of Investment and Management},
      volume = {5},
      number = {2},
      pages = {6-16},
      doi = {10.11648/j.jim.20160502.11},
      url = {https://doi.org/10.11648/j.jim.20160502.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jim.20160502.11},
      abstract = {In this study the effects of board characteristics (specifically proportion of outsiders in the board, board size, CEO-Chairman duality, and board meeting frequency), debt policy, and dividend policy are investigated in the Ethiopian context using two theories of corporate governance, which are agency theory and stewardship theory. Financial performance is measured using return on assets and return on equity. The study used panel data and Pooled OLS regression to analyze the relationship between corporate governance mechanisms and firm performance using a data set of 8 insurance companies of Ethiopia over the period 2008-2012. The results show that proportion of outside directors, board size, debt ratio, and ownership have a significant negative effect on performance of insurance companies. However, boards meeting frequency, firm size and firm age, are identified to have a significant positive impact on firm performance. Dividend policy have no effect on firm performance while the effect of CEO-Chairman Duality remains untested since it is not practiced in any one of the insurance companies.},
     year = {2016}
    }
    

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  • TY  - JOUR
    T1  - Corporate Governance Mechanisms and Firm Performance: The Case of Ethiopian Insurance Industry
    AU  - Asamnew Techan Demeke
    Y1  - 2016/07/21
    PY  - 2016
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    DO  - 10.11648/j.jim.20160502.11
    T2  - Journal of Investment and Management
    JF  - Journal of Investment and Management
    JO  - Journal of Investment and Management
    SP  - 6
    EP  - 16
    PB  - Science Publishing Group
    SN  - 2328-7721
    UR  - https://doi.org/10.11648/j.jim.20160502.11
    AB  - In this study the effects of board characteristics (specifically proportion of outsiders in the board, board size, CEO-Chairman duality, and board meeting frequency), debt policy, and dividend policy are investigated in the Ethiopian context using two theories of corporate governance, which are agency theory and stewardship theory. Financial performance is measured using return on assets and return on equity. The study used panel data and Pooled OLS regression to analyze the relationship between corporate governance mechanisms and firm performance using a data set of 8 insurance companies of Ethiopia over the period 2008-2012. The results show that proportion of outside directors, board size, debt ratio, and ownership have a significant negative effect on performance of insurance companies. However, boards meeting frequency, firm size and firm age, are identified to have a significant positive impact on firm performance. Dividend policy have no effect on firm performance while the effect of CEO-Chairman Duality remains untested since it is not practiced in any one of the insurance companies.
    VL  - 5
    IS  - 2
    ER  - 

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