AN ASSESSMENT OF CORPORATE GOVERNANCE PRACTICE BY BOARD OF DIRECTORS AND COMPANY PERFORMANCES AT NIB INTERNATIONAL BANK, ADDIS ABABA HEAD OFFICE

Abstract

Corporate governance is a rule, procedure and process by which organizations are controlled and directed with the best interest of stakeholders. It is considered as corner stone of the modern market oriented economy. Corporate governance is concerned with functioning of board of directors that are appointed by shareholders to oversee the activities of their company. The researcher is thus highly interested to learn how corporate governance is practiced in financial institutions, especially banks that have considerable impact on socio-economic development of a country taking data and information of a case bank. Assessing the practice on ground by board of directors at Nib- International Bank through the lens of best practices in developed economies is the area of concern. The research work was designed to examine, review and describe the corporate governance practices of the case bank. Apart from intensive literature review on the subject, legal regulations, directives and bylaws the board of directors has to comply with, and its structural set up were thoroughly gone through by the researcher. The study had also incorporated corporate governance mechanisms like board size, board gender diversity, board members educational qualification, board members business management and industry specific experience, and audit committee size. The study controls the effect of size, leverage and growth of banks. Interview results obtained from purposely chosen board and top management members were made part of data and information used for analysis. Financial performance indicators like return on assets, return on equity, net interest margin were derived from the financial statements of the bank. The findings confirm that the board of directors is competent enough to maintain sustainability of the bank and fully comply with rules, regulations and directives of the country. Limitations observed are attributable to external factors that are beyond the control of the board of directors. Comments and suggestions the researcher believes could be done internally are forwarded. As poor corporate governance practice is one of the major causes of collapse and demise of business firms’ further research works by scholars in management, economics, business administration, finance etc, is inevitable. This research is assumed to add value to research work on corporate governance adoption and practice in developing economy like that of ours.