The effect of corporate governance on banksprofitability; a study on private commercial banksin ethiopia

Abstract

The purpose of this study was to provide an insight on corporate governance and important factors for well-functioning of corporate commercial banks. This study aimed to identify the effect of governance on bank profitability of corporate commercial banks in the case of Ethiopia. Ten year data from seven corporate commercial banks for the period 2010-2019 and survey data from customers were used to study the profitability of seven private Ethiopian corporate commercial banks. The survey data were collected through questionnaires and secondary data were extracted from banks archive. The questionnaire were physically distributed to 265 Wogagen, Dashen, Awash, Abyssinia, United, Oromia Cooperative, and NIB Banks’ customers with response rate of 97.4% and banks’ branch managers also interviewed from these seven banks. Descriptive statistics analysis tools such as frequency, and percentages were used for qualitative data obtained using questionnaire from customers and the inferential statistics methods multiple linear regression model and correlation analysis were used for quantitative data to present and explore the overall characteristics of the data and to extract important information from the data. Specifically, the linear was performed to see the effect of different factors on the profitability of the banks. Audit committee member, number of times the board conduct meeting in a year and total number of board directors had significant effect on the profitability of the bank as analysis for Abyssinia bank showed whereas boards committee member, actual number of boards and number of times the board conduct meeting per a year had significant effect on the profitability of Awash International bank. The corporate commercial bank management must give special attention all significant factors in both logistic and linear regression model results in order to get maximum profit.