Abstract:
Corporate governance is the most recent and youngest discipline and philosophy in global
business environment. That is why currently firms in developed and developing countries are
jointly incorporated corporate governance in their curriculum. Corporate governance has
several development principles which made it to be highly entertained in business environment
and to be taken as principal development agenda in business world. In financial industry
corporate governance mechanisms have especially attention in contributing towards the
protection of agency problems or costs. The ultimate objective in fighting toward agency cost is
curbing wastage of resources and avoiding investment of shareholders' funds on unprofitable
activities. The works of different scholars mentioned on varieties of literatures revealed that,
firms governed and structured according to corporate governance mechanisms have better
performance record than firms with no corporate governance mechanisms which are performing
poor. Basically, this finding is not to mean that it remain the same for all researchers' findings
in their work on the same discipline of study, because works of different scholars oppose this
finding as they have found mixed results on the relationships between different variables of
corporate governance and financial performance. This study has been tried to examine the effect
of corporate governance mechanisms on firms' financial performance on the selected
commercial banks in Ethiopia by identifying some selected determinant variables which are
believed to consist direct relationship with performance of financial industry in Ethiopia,
typically on selected commercial banks through reviewing of financial performance recorded.
Dependent variables used to show financial performance are return on asset, return on equity
and operating profit margin. Furthermore, two control variables, firm size and financial
leverage were used. For the analysis of raw data, both correlation analysis and pooled panel
data regression models of cross-sectional and time series data for analysis.
