Corporate governance has been a hot bed for scholars from diverse disciplines. Managers whose interests are not congruent with that of shareholders‟ do not have the incentive to maximize shareholder value. Agency theory implicitly assumes corporations as arenas of the principal-agent conflict. On the other hand, organizational perspectives maintain that firms differ in their adopted corporate governance level depending on the environmental contingencies in which they operate. This study develops a contingency framework by synthesizing agency theory and organization theory. The aims of this study are to examine the effect of firm level contingencies on corporate governance and examine the moderating impact of firm level contingencies on the relationship between corporate governance and firm financial performance in the Ethiopian non-financial share companies. Data were collected from public and private sources for 42 companies covering the period 2009-2013. For the first time overall corporate governance index is constructed from board structure, ownership structure, and disclosure and transparency. By specifying fixed effect regression models the study accounts for the presence of unobserved firm heterogeneity. Moreover, a moderation fixed effect model is specified for the corporate governance-performance relationship. Results show that firms choose their corporate governance in response to contexts in which they operate. High-risk firms have good corporate governance. Corporate governance is enhanced if the largest owner is government or bank. Findings show not only the positive influence of corporate governance on financial performance but also the positive effect of corporate governance on financial performance is enhanced where there are high agency problems. Firm growth, firm level risk and identity of the largest shareholder moderate the relationship between corporate governance and firm financial performance. The study contributes to the literature by providing evidence that firms endogenously choose their corporate governance and the effect of corporate governance on performance depends on firm level contingencies. For practice, the positive link between corporate governance and financial performance informs us that instituting and enforcing corporate governance should be taken seriously. Areas that require priority include the legal frameworks and their enforcement, additional corporate governance standards, strong financial market particularly a stock market. Future research can build on the limitations of the study. For instance, researchers can increase the sample size, compare industries or perform cross-country studies. / Business Management / DBL

Corporate governance has received considerable attention over the past few decades especially after several corporate scandals and global financial crises surfaced. It is a tool that ensures the wealth maximization interest of shareholders (Grove & Clouse, 2015; Gupta, 2015). Several studies on corporate governance have been made around the world, mostly in the context of developed nations. These have made significant contributions to the corporate governance literature and practice. However, there is scant research that addresses corporate governance issues in the context of emerging economies. In terms of applicability, it is important to view corporate governance not as a whole but in the context of specific fashion due to the economic, political, social and cultural differences among countries. In spite of the numerous studies in the subject and their contributions, a significant gap exists in our understanding of the relationship between corporate governance structure, process and board performances. Most of the prior studies focused on board structure giving much less emphasis to the board process- the missing link. By way of addressing the gap and providing a broader understanding of the relationship among the corporate governance variables, this study, among others, explored how board structure and board process influence the board performance in an emerging market economy context. Board performance has hardly been explored in this setting and this study tries to contribute to the existing literature by examining the antecedents of the boards‟ performance. The antecedents are positioned in the second order constructs that include the board structure and the board process. The antecedents with the board structure go beyond the usual variables of size, CEO duality and the outside/inside directors‟ ratio. A mixed method approach was used in the collection and analysis of the data. Both quantitative and qualitative data were collected from private and public banks‟ governing bodies and various groups of stakeholders. The quantitative data were mainly analyzed statistically using the Partial Least Square method of the Structural Equation Modeling. The qualitative data obtained from the survey and the interviews were thematically analyzed to identify important concerns. The findings from the quantitative data analysis showed that board structure has positive and significant influence on board process, board service and control v task performance. The findings also indicated a positive and significant relationship between board process and both board service and control task performance. Furthermore, the study revealed that board process mediates the relationships between board structure and both board service and control roles; it was also found that ownership type affects board performance but has no influence on company performance. The stakeholders‟ perceptions of various aspects of corporate governance practices, as beginners, were found out to be not bad. However, Ethiopia, like many emerging market economies, does not yet have a fully developed legal and regulatory system. Additionally, the enforcement capacities of the regulatory organ are at a nascent stage, and a private sector that is able to support effective corporate governance has yet to emerge. The nature of the Ethiopian banking corporate governance system can be characterized by a one tier system with a non-executive board of directors and ownership concentration. The boards of directors are also mainly control oriented rather than strategic or service oriented leaders. / Graduate School of Business Leadership (SBL) / D.B.L.