Vol. 3, Issue 2 (2017)
Corporate governance, diversification, and risk management in commercial banks of Ethiopia
Author(s): K Sambasiva Rao, Teshome Dula Jirra
Abstract: This study examined the effect of corporate governance attributes and bank characteristics on liquidity risk in commercial banks of Ethiopia. Out of 18 commercial banks operating in Ethiopia, 14 banks were selected based on their age. Data of 6 year totaling 84 observation had collected from National bank and each sampled banks. We have used panel data model and based on hauseman specification test, random effect model was selected. The results of the study showed that risk committee size, bank liquidity, capital adequacy ratio, loan concentration, income diversification, bank size, and loan growth were variables which had significant effect on liquidity risk. Whereas, board size, ownership type, risk committee meeting frequency and operational efficiency of management had no significant effect on liquidity risk. Therefore, it is recommended that the commercial banks should improve loan concentration by diversifying their loan portfolio, and they should enhance income diversification by relying on non-traditional income sources, and the board sub-committee; risk committee size should be given due emphasis to enhance effective risk management in Ethiopian commercial banks.