The Determinants of Corporate Financial Performance in Corporate Governance Mechanism of Private Insurance Companies in Ethiopia

Abstract

 This study was undertaken with the objective of identifying the impact of corporate governance mechanism on financial performance of private insurance companies in Ethiopia. The study was based on thirteen private insurance companies’ currently practicing insurance business. They were sampled by using purposive sampling techniques, within the period of 2012-2022, totalling 143 observations. The study used quantitative approach to measure the data. To collect the primary and secondary data, interview and document review was conducted. The collected data were analysed through usage of panel data analysis through multiple linear regression model by the help of SPSS v26 and Eview 10 softwares. The study analyses a range of internal corporate governance variables board of director’s compensation, board size, management soundness, dividend policy and frequency of board meeting. The random effects technique has been applied to find out the most significant variables from considered internal corporate governance variable. The regression results show that management soundness and frequency of board meeting has positive and significant effects on financial performance of private insurers’ proxy by ROE. In contrast, board size, dividend policy and board of director’s compensation don’t have statically significant impacts on insurers’ performance but have positive relationship. Therefore the study concludes that all corporate governance measures have a positive impact on insurance companies' financial performance. In general, to obtain significant and positive impact stakeholders should give emphasis on management soundness and frequency of board meeting when they set governance policy for industry as general and for the company specifically.