EFFECTS OF CORPORATE GOVERNANCE PRACTICES ON FINANCIAL

PERFORMANCE OF MANUFACTURING SHARE COMPANIES IN ADAMA.

A THESIS PROPOSAL SUBMITTED TO THE REQUIREMENT IN PARTIAL FULFILLMENT

OF THE AWARD DEGREE OF MASTERS OF SCIENCE IN ACCOUNTING AND FINANCE

BY:

GEMECHU GUDETA JALETA

DEPARTMENT OF ACCOUNTING AND FINANCE

COLLEGE OF BUSINESS AND ECONOMICS

ARSI UNIVERSITY

ADVISOR

ABDI DUFERA (PhD).

MARCH, 2021

ASELA, ETHIOPIA
EFFECTS OF CORPORATE GOVERNANCE PRACTICES ON FINANCIAL
PERFORMANCE OF MANUFACTURING SHARE COMPANIES IN ADAMA

BY:

GEMECHU GUDETA JALETA

A THESIS PROPOSAL SUBMITTED TO THE REQUIREMENT IN PARTIAL FULFILLMENT

OF THE AWARD DEGREE OF MASTERS OF SCIENCE IN ACCOUNTING AND FINANCE.

PRINCIPAL ADVISOR: ABDI DUFERA (PHD)

MARCH, 2021

ASELA, ETHIOPIA
 ARSI UNIVERSITY
SCHOOL OF GRADUATE STUDIES

This is to certify that the Thesis proposal entitled “effects of corporate governance practices on
financial performance of manufacturing share companies in Adama” submitted in partial
fulfillment of the requirements for the degree of Master of Science in Accounting and finance,
the Graduate Program of the School of Business and Economics, and has been carried out by
Gemechu Gudeta Jaleta, under our supervision. Therefore we recommend that the student has
fulfilled the requirements and hence hereby can submit the proposal to the school of Business
and Economics.

________________________ ________________________ _________________

Name of Principal Advisor Signature Date

________________________ ________________________ _________________

Name of Co-advisor Signature Date
 DECLARATION

I, Gemechu Gudeta jaleta, have carried out a thesis proposal on “effects of corporate governance
practices on financial performance of manufacturing share companies in Adama” independently
in partial fulfillment of the requirement of the Masters of Science (MSC) Degree in Accounting
and Finance with the guidance and support of the my research advisor, Abdi Dufera (PhD)

I, also declare that this thesis is my original work and that all sources of materials used for the
thesis have been duly acknowledged.

Declared by:

________________________ ________________________ _____________________

Name of the Designate Signature Date

Place of Submission: _____________________

Table of Contents
DECLARATION..............................................................................................................................................3
ACRONYMS AND ABBREVIATIONS...............................................................................................................5
.................................................................................................................................................................... 5
1. CHAPTER ONE: INTRODUCTION.................................................................................................7
1.1. Background of the study..............................................................................................................7
1.2. Statement of the Problem.............................................................................................................8
1.3. Objective of the Study....................................................................................................................11
1.4 Research Hypotheses.......................................................................................................................12
1.5 Scope of the Study...........................................................................................................................12
1.6 Significance of the Study.................................................................................................................12
2. RESEARCH METHODOLOGY.......................................................................................................13
2.1. Introduction...............................................................................................................................13
2.2 Description of the Study Area....................................................................................................13
2.3 Research Design and Approach.................................................................................................14
2.3.1 Research Design................................................................................................................14
2.2 Research Approach....................................................................................................................14
2.3 Source of Data and Data Collection Methods............................................................................15
2.4 Population of the Study and Sampling Design...........................................................................15
2.5 Variables of the Study and Their Measurement.........................................................................15
2.5.1 Corporate Governance Variables (Independent Variables)................................................16
2.5.2 Firms’ Performance Variable (Dependent Variable)..........................................................16
2.5.3 Control Variable................................................................................................................17
2.5.4 Lists of Variables and Measurement Basis........................................................................17
2.6. Model Specification...................................................................................................................18
2.7. Methods of Data Analysis..........................................................................................................18
3. Work Plan and Budget Application...................................................................................................19
3.1 Work plan activities...................................................................................................................19
3.2 Budget application.....................................................................................................................20
3.2.1 Stationery...........................................................................................................................20
 3.2.2. Miscellaneous Expense......................................................................................................20
3.2.3. Summary of Expenses........................................................................................................21
REFERENCES..........................................................................................................................................21

ACRONYMS AND ABBREVIATIONS

AACCSA= Addis Ababa Chamber of Commerce and Sectorial Association

ACCA= Association of Chartered Certified Accountants
ANOVA= Analysis of Variance
BIS= Bank for International Settlement
CSA=Central Statistical Agency
CSR= Corporate Social Responsibility
EPS= Earnings per Share
ERCA= Ethiopian Revenue and Custom Authority
GTP= Growth and Transformation Plan
HIH= Hospital in Home
KPMG= Klynveld Peat Marwick Goerdeler
MCI= Mid- Columbia Insurance
MFI= Microfinance Institution
NIM= Net Interest Margin
OECD= Organization for Economic Cooperation and Development
PASDEP= Plan for Accelerated and Sustained Development to End Poverty
ROA= Return On Asset
ROE=Return On Equity
SEBI= Securities and Exchange Board of India
UNDP= United Nations Development Programme
 1. CHAPTER ONE: INTRODUCTION

1.1. Background of the study

“Corporate governance refers to the code of conduct through which companies are directed and
controlled” (Gupta, 2014). The idea of corporate governance has been in existence for a long
period of time but it was official in United Kingdom in the early 1990’s. The issue of corporate
governance has become the most crucial topic in advanced countries after some events such as
frauds and company collapses. Currently, it has also attracted a great attention in emerging
countries (Yılmaza, 2018).
The concept of corporate governance has become burning issue starting from the time when
famous organizations of the world such as Enron Corporation & MCI Inc. in U.S, HIH insurance
in Australia, Parmalat in Italy and other companies have faced financial scandals. As a result of
financial difficulty, corporate governance is getting more attention. Good corporate governance
practice is a device how companies are directed and organized become a basic topic and obtained
wide attention both in practice and in academic research (Wondem, 2019).
The first objective of any organization is to effectively, efficiently and ethically manage the
company for profitable long term growth and long-lasting existence. Thus, the development of
good corporate governance is essential in order to protect corporate stakeholders, and maintain
factors for control and prevention of collapse and permanent economic depression (Olayiwola,
2018). Good corporate governance ensures that business organizations are fair, transparent,
efficient and accountable for their doing. Good corporate governance is associated with
productivity of organizations and also the achievement of corporate objectives. Conversely,
weak corporate governance leads to waste, mismanagement and corruption (WANJIRU, 2013).
The reasons for weak corporate governance are found across this globe which is mostly tied with
fraudulent actions and other major malpractices. Governance is all about inspiring corporate
sector to be accountable, fair, transparent and responsible as indicated by the World Bank
president. (Philip, 2014).
Corporate governance involves a set of relationships between a company’s management, its
board, its shareholders and other stake holders (Nguyen, 2017). It specifies the distribution of
rights and responsibilities among company’s stake holders (including share owners, directors and
managers) and articulates the rules and procedures for making decisions on corporate affairs
(Palaniappan, 2017).
Tigabu and Getahun, 2018 stated that manufacturing sectors open the door for potential
investors to increase their capital rather than agricultural and service sectors. Pursuant of these
potentials benefits of manufacturing, the government of Ethiopia has given the manufacturing
sector due emphasis in its different development plans, such as the PASDEP I & II and GTP I
and II.
The Ethiopian manufacturing sector has had two distinct features: first, a low level of
industrialization in terms of the sector’s share in GDP, export earnings, industrial intensity and
competitiveness. Second, the industrial structure is dominated by small firms and resource based
industries (in particular the food industry) and (is) concentrated around the capital city (Oqubay
A, 2015).
As they are not going on the way what it should be however a changing land scape of corporate
business environment in the country where the activities of corporate business operations today
are like those industrialized nations but not in governance practice(Wondem, 2019). Firm
financial performance is affected by corporate governance attributes of firms, because their
achievement or letdown depends on the extent to which they are managed efficiently.
Performance measures are the backbone of economic units because of no decision cannot be
made without them. Financial performance measure is one of the vital performance measures for
economic units.
According to Ethiopian Commercial Code of 1960, there are six forms of business organizations,
namely: Ordinary Partnership, Joint Venture, General Partnership, Limited Partnership, Share
Company and Private Limited Company. Among those types the study will focuse on share
company types only specifically manufacturing share companies. This study will adds value to
the existing literature by giving new evidence about the effect of corporate governance practices
on the manufacturing share companies‟ financial performance measured by accounting based
measures only due to absence of organized stock market in Ethiopia.
1.2. Statement of the Problem
Corporate governance is gradually becoming vital in organizations as an approach of improving
organizational performance. Weak corporate governance has led to low performance of
organizations throughout this world and also suppressing sound and workable economic
decisions. It is highly assumed that the leading agent for the endurance and the progress of the
company is mainly its “Corporate Governance” policies. Companies can follow the stake holder
model or shareholder model. Regardless of this fact the practice of corporate governance is
increasingly becoming important. The increase in financial and managerial scams has led the
investors to increasingly look for transparency and professional management in handling the
company’s business (Gupta, 2014).
For real, there is no system of governance which can totally protect companies from collapses. It
is difficult to say that all companies around this visible world are governed by common set of
guidelines because of complex business environment. However, review of their corporate
governance attributes/ arms / from time to time is the home work for them to reduce the anxiety
of being financially underperformance. Companies’ corporate governance practices and their
financial performance relationships are exposed to many factors that limit these relationships.
The legal system and financial structure of a country may have significant impacts on this
relationship (Yılmaza, 2018).
As cited by (Yılmaza, 2018 and Ueng (2016) investigated the relationship between the quality of
corporate governance policy and the firm financial performance by using sample of 3068 firms
from corporate library data base. Thus, the relationship between corporate governance and
financial performance has caught wide attention of researchers in the last epoch. Numerous
researches have been conducted in the past to investigate this linkage, but there has been lack of
conclusive evidence (Aggarwal, 2013).
Over the period, due to increase in various corporate frauds, corporate governance mechanisms
of companies across the globe brought about the need for good corporate governance practices.
Economic crisis and corporate failures have initiated the discussion on corporate governance in
both industry and academia (Kuntluru, 2019).
There is no single model of corporate governance. Governance practices vary not only across
countries but also across firms and industry sectors. Each country has through time developed a
wide variety of mechanisms to overcome the agency problems arising from the separation of
ownership and control (Andersson, 1999).
According to Kang et al. (2007) there was a call for country-specific corporate
governanceperformance study to be conducted. In spite of this there is still a dearth of corporate
governance literature in most developing economies (Darko et al., 2016). The weakness of
corporate governance is possibly the very decisive factor blamed for the corporate failure
consequences. (Wondem, 2019) suggested that the literature on Africa is still very thin or infant
although scholars in the advanced economies have established a large body of literature on the
subject.
The corporate governance framework in Ethiopia comprises the Commercial Code of the Empire
of Ethiopia (1960) and the Ethiopian Code of Corporate Governance (2011, the Code). The Code
was developed by the Private Sector Development hub under the Addis Ababa Chamber of
Commerce and sectorial associations. For listed companies, the application of the Code is based
on the ‘apply or explain’ approach. The Commercial Code of the Empire of Ethiopia is currently
revised by the Ministry of Justice (Low, 2017).
Corporate governance practices of Ethiopian share companies are not as expected in line with the
varying land scape of corporate business environment. This is due to lack of awareness as to
corporate governance, lack of up to date regulatory framework, absence of policy framework and
Unstructured governance practices because of national principles and codes (Wondem, 2019).
Financial performance is used to identify companies overall financial health over a given period
of time and can also be used to compare similar firms across the same industry or to compare
industries or sectors in aggregation. Most previous studies have been undertaken in Ethiopia on
impacts of corporate governance practices on financial performance of financial institutions like
(Wolde, 2018) (Ferede, 2012) (Harun, 2017) (Zegeye, 2015)and (Mitiku, 2015)
However, these studies relate to more widely Banking industries, Insurance industries and
microfinance institutions and cannot be represent manufacturing industries due to the differences
in corporate governance structures and cultures. As per the knowledge of the researcher there is
no published research made on the effects of corporate governance practices on manufacturing
share companies’ financial performance. The research gap is in case of underdeveloped countries
dearth of literature. In addition to the area gap there is no specific code of conduct for the
corporate governance of manufacturing share companies in Ethiopia.
Manufacturing is the production of goods for use or sale using machines, tools and labor. It
refers to a series of human activities, from hand craft to high tech, but is most commonly applied
to industrial production, in which raw materials are transformed in to new products finished
goods on a large scale. The manufacturing sector comprises establishments engaged in the
mechanical, physical, or chemical transformation of materials, substances or components in to
new products (CSA, 2015).
Failure of manufacturing companies would affect the entire economy of a country. Therefore, in
order to ensure the improvement of the company’s performance, economic efficiency and
growth, and to increase investors’ confidence; strong, effective and good corporate governance
has to be developed and implemented. Keeping this in view and the potential contribution of the
manufacturing industry to the economy of underdeveloped countries, this study was conducted to
measure and analyze the effect of corporate governance practices on firm’s financial
performance using manufacturing companies in Adama, Ethiopia. This study fills the gap and
serves as point of reference for further research in corporate governance. It will also provide
empirical evidence on the effect of corporate governance mechanisms on financial performance
of manufacturing share companies.

1.3. Objective of the Study

1.3.1. General Objective
The overall objective of this will be study is to examine the effect of corporate governance
practices on firms’ financial performance by taking evidence from manufacturing share
companies in Adama, Ethiopia.
1.3.2 Specific Objectives
By taking in to account the overall objective of examining the effect of corporate governance
practices on firm’s financial performance, this study will develop several specific objectives.
Specifically the study will take a look at the following objectives.
 To evaluate the effect of board size on the financial performance of manufacturing share
companies in Adama.
 To investigate the effect of Board of directors‟ business management experience on the
financial performance of manufacturing share companies in Adama.
  To examine the effect of audit committee size on the financial performance of
manufacturing share companies in Adama.
 To explore the effect of ownership concentrations on the financial performance of
manufacturing share companies in Adama.
1.4 Research Hypotheses
In this study, the following testable hypotheses were developed.
H1. Size of the board has positive and statistically significant effect on financial performance of
manufacturing share companies in Adama.
H2. Board of directors‟ business management experience has positive and statistically
significant effect on financial performance of manufacturing share companies in Adama.
H3. Size of audit committee has negative and statistically significant effect on financial
performance of manufacturing share companies in Adama.
H4. Ownership concentration has positive and statistically significant effect on financial
performance of manufacturing share companies in Adama.

1.5 Scope of the Study

The study will confined only to those manufacturing share companies operating in Adama city
administration. Even if financial performance can be determined by different factors from
different perspectives, the study aims to examine the effect of corporate governance on the
financial performance of manufacturing share companies in Adama Ethiopia. Methodologically,
the study will use explanatory and descriptive research design with mixed research approach.
Besides, the secondary data that will be used for the study includes thirteen years (i.e. 2007-2020
audited financial statement. Dependent variable is delimited to only accounting based measure
due to absence of organized stock market in Ethiopia.
1.6 Significance of the Study
This study will may be add some value to the decision of policy makers by giving clues on how
the problem can be tackled. It may also provide basic knowledge concerning corporate
governance attributes for the beneficiary. On the other hand, it may help external users of
companies’ information like suppliers, governmental agencies, creditors, potential investors and
customers by identifying both negative and positive effects of corporate governance variables on
the financial performance. Additionally, it may be used as cornerstone to other researchers who
are intended to conduct the study on the same area. Eventually, it is highly supposed that the
outcome of this study will play its lion share for manufacturing companies by identifying
relevant corporate governance practices and their effect on their financial performance.
1.7 Organization of the paper
The study consists five chapters. First chapter comprises introduction part, statement of problem,
objectives, hypotheses, scope, significance and limitations of the study. Second chapter gives a
highlight of relevant theoretical and empirical reviews of the literature with conceptual
framework. Third chapter gives description about methodology and variables used in the study.
Results and discussions of the study were presented in fourth chapter and finally, the study ends
with summary of findings, conclusions and recommendations.
2. RESEARCH METHODOLOGY
2.1. Introduction
In this section the researcher will discuss on the methods that is used in the research. It includes:
description of the study area, research design, data sources, population and sampling, methods of
data collection, description of variables and measurements, model specification and methods of
data analysis.
2.2 Description of the Study Area
Adama (Oromo: Adaamaa or Hadaamaa), the city officially known as Adama formerly known as
Nazret (ናዝሬት), is a city in central Oromia. Adama forms a special zone of Oromia and is
surrounded by East Shewa Zone. It is located at 8.54°N 39.27°E at an elevation of 1712 meters,
99 km southeast of Addis Ababa. The city sits between the base of an escarpment to the west,
and the Great Rift Valley to the east. Adama is a busy transportation center. The city is situated
along the road that connects Addis Ababa with Dire Dawa. Additionally, the new Addis
AbabaDjibouti rail way runs through Adama.
The city name Adama was derived from a popular hotel called Adama found in the city. The
Oromo word adaamii, which means a cactus or a cactus-like tree. More specifically, adaamii
means Euphorbia Candelabrum. Based on the 2007 Census conducted by the Central Statistical
Agency of Ethiopia (CSA), this city has a total population of 220,212, an increase of 72.25%
over the population recorded in the 1994 census, of whom 108,872 are men and 111,340 women.
With an area of 29.86 square kilometers, Adama has a population density of 7,374.82; all are
urban inhabitants. A total of 60,174 households were counted in this city, which results in an
average of 3.66 persons to a household, and 59,431 housing units. The four largest ethnic groups
reported in Adama were the Oromo (39.02%), the Amhara (34.53%), the Gurage (11.98%) and
the Silte (5.02%); all other ethnic groups made up 9.45% of the population. Amharic was spoken
as a first language by 59.25%, 26.25% spoke AfaanOromoo and 6.28% spoke Guragiegna; the
remaining 8.22% spoke all other primary languages reported (Wikipedia).
2.3 Research Design and Approach

2.3.1 Research Design

A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure. In
fact, the research design is the conceptual structure within which research is conducted; it
constitutes the blueprint for the collection, measurement and analysis of data. As such the design
includes an outline of what the researcher will do from writing the hypothesis and its operational
implications to the final analysis of data (Kothari, 2014). The main objective of this study will be
to examine the effect of corporate governance on the financial performance of manufacturing
share companies. In order to attain this purpose, explanatory and descriptive research design will
be used. Explanatory researches establish or create causal relationships between variables
whereas descriptive survey researches describe state of affairs as it is.
2.2 Research Approach
According to Creswell (2003) in terms of investigative study there are three common approaches
to business and social research namely, quantitative, qualitative and mixed methods approach.
Quantitative research is a means for testing objective theories by examining the relationship
among variables (Creswell 2009). On the other hand, qualitative research approach is a means
for exploring and understanding the meaning individuals or groups ascribe to a social or human
problem with intent of developing a theory or pattern inductively (Creswell 2009). Finally,
mixed methods approach is an approach in which the researchers emphasize the research
problem and use all approaches available to understand the problem (Creswell, 2003). In general,
in light of the discussions above on qualitative, quantitative and mixed research methods, in this
study, the quantitative method will be predominantly used. However, to have a better insight and
gain a richer understanding about the research problem, the quantitative method was
supplemented by the qualitative method of inquiry. That is, to get the benefits of a mixed
methods approach, as presented earlier, and to alleviate the bias in adopting only either
quantitative or qualitative approach and this study was combining both quantitative and
qualitative research approaches.
2.3 Source of Data and Data Collection Methods
There are two types of data sources namely: primary and secondary data sources. Primary data
can be obtained through observation or through directly communicate with respondents or
through personal interviews while secondary data can be extracted from magazines, reports,
publications, etc. The researcher was used both secondary and primary data sources. The
secondary data will be collected from audited financial statement of each manufacturing share
companies between the years 2007-2020, since this time period can provide recent financial
position of those manufacturing share companies and also it enhances the easiness of data
collection. Board related information was collected through questionnaires.
2.4 Population of the Study and Sampling Design
The general objective of this study will be to examine the effect of corporate governance on the
financial performance of manufacturing share companies doing their business in adama city
administration. The target populations of the study are those manufacturing share companies
which operate in Adama city administration. As per the data obtained from ERCA Adama
branch, currently in 2021, there are 5 manufacturing share companies providing production
activities for their users. For this study the researcher will use census survey. A complete
enumeration of all the items in the population is known as a census inquiry. It can be presumed
that in such an inquiry, when all items are covered, no element of chance is left and highest
accuracy is obtained (Kothari, 2004).
2.5 Variables of the Study and Their Measurement
Variables that were used in this study are classified in to three categories. Namely: independent
variables, dependent variable and control variable. Independent variable is that variable which is
predecessor to the dependent variables. Dependent variable is effect variable that is expected to
be influenced by cause (independent) variables. Independent variables that are not related to the
purpose of the study, but may affect the dependent variable are known as extraneous variables
Kothari (2004). Thus, the researchers need to lessen the impact of these variables. Accordingly,
in this study, the control variable was selected based on previous empirical studies and
fundamental corporate governance theories. The brief definition and their measurement will be
discussed below.
2.5.1 Corporate Governance Variables (Independent Variables)
Board Size: Board size is the number of board members for the manufacturing share companies
during the period under study.

Boards’ Business Management Experience: boards’ business management experience is

measured by the number of board of directors having the managerial experience in each study
year.

Audit Committee Size: Measured by total number of audit committee members in each
manufacturing share companies.

Ownership Concentration: is the concentration of shares by few shareholders. This can be

measured as the percentage of shares held by the top ten shareholders out of the total shares
outstanding.
2.5.2 Firms’ Performance Variable (Dependent Variable)
According to Haniffa and Hudaib (2006) there is no single agreed up on proxy on which
financial performance can be measured. They argued that there is no agreement in the literature
on which measure is the best indicator of financial performance. Additionally, they state that
every measure has its own strengths and weaknesses; thus there is no specific measure to be the
best proxy for financial performance. Financial performance of firms can be observed from two
measurement basis. These are market based and accounting based measures. Accounting based
measures consider the current company’s financial performance while market based measures
deal with long term financial performance.
The two mostly known proxies of firms’ financial performance under accounting based measure
are ROA & ROE. From the perspective of shareholders, ROE is considered to be the most
crucial ratio to measure corporate performance because it focuses on the returns of the
shareholders. Due to absence of secondary market in Ethiopia, the researcher has selected
accounting based measure as proxies for corporate performance and ignores market based
measurement. Market based measures like Tobin’s Q needs current market price of stock and
other market based information. Since there is no secondary market in Ethiopia, It is impossible
to use Tobin’s Q as well as other market based measures. ROE tends to tell us how effectively an
organization is taking advantage of its base of equity, or capital (Hannagan, 2008). The
researcher has preferred ROE for the following reasons.
ROE has gained popularity for several reasons and has become the preferred measure at huge
(giant) companies. One larger reason for the growing popularity of ROE is simply, that it is not
asset-dependent. ROE can be applied to any line of business or any product. ROE on the other
hand looks at how effectively any business is using shareholders’ equity. Many observers prefer
ROE, since equity represents the owners’ interest in the business. ROE is also warren Buffet‟s
favorite measure of performance (www.experian.com). On the other hand, one of the most
crucial profitability metrics is Return on Equity. ROE compares one firm against its peers. With
ROE, it measures performance and generally the higher the better. For this reason ROE is best
used to compare companies in the same industry. This performance ratio concentrates on past
firms’ performance to get a gauge on future expectation. The formula for Return on Equity is:
Net profit /Average shareholder equity (Total owners’ equity) for period= Return on Equity.

2.5.3 Control Variable

Firm age- It is the number of years the firm being in existence or in operation since its
origination as a firm. Performance can also be influenced by the age of the firms. Older firms are
likely to achieve greater efficiency by reducing costs than younger firms. The variable of age is
defined here as the natural logarithm of years the firm is on the market.

2.5.4 Lists of Variables and Measurement Basis

Table1. Lists of Variables and Measurement Basis

Variables Description basis of Measurement Representation

Firm Performance Variable
Return on Equity (ROE) Net profit/Total owner’s equity ROE
Independent Variables
Board Size Total number of board members BS
 during each period under study
Boards’ Business management Total number of boards having BBME
Experience business management experience in
each study year.
Audit Committee size Measured by the total number of ACZ
Audit committee members in each
period under study.
Ownership Concentration Measured as the percentage of shares OWSHCON
held by the top ten shareholders out
of the total shares outstanding.
Control Variable
Age of manufacturing share Total number of years the firm being AMSHC
companies in existence.
Source: researcher’s own conclusion.
2.6. Model Specification
The empirical model for the study to find out the effect of corporate governance practices on the
financial performance of manufacturing share companies was as follows:
ROEit = β0 + β1a (BSit) + β1b (BBMEit) +β1c (ACZit) + β1d (OWSHCONit) + β1e(AMSHCit) +μit
Where:
i= cross sectional dimension
t= time- series dimension
β0= intercept
BS= Board size
BBME= Boards Business Management Experience
ACZ= Audit Committee Size
OWSHCON= Ownership Concentration
AMSHC= Age of Manufacturing Share companies.
μ= Error Term
2.7. Methods of Data Analysis

The data collected through the aforementioned tools were analyzed using the method known as
descriptive statistics, correlation and multiple panel linear regression methods. The descriptive
statistics has been used to quantitatively describe the important features of the variables using
 mean, maximum, minimum and standard deviations. Pearson correlation analysis was used to
identify the relationship among the variables. But it does not allow the researcher to make causal
inferences regarding the relationship between variables (Marczyk et al., 2005). That is why a
multiple panel linear regression analysis was used to test the hypothesis and to explain the
relationship between corporate governance variables and financial performance measure by
controlling the influence of manufacturing share companies’age. Qualitative analysis was used
for qualitative data collected through questionnaire. The variables were selected based on
alternative theories agency, resource dependency and stewardship and previous empirical studies
related to corporate governance and firm performance. Accordingly, the theory and empirical
studies, the independent, dependent and control variable of the study was identified in order to
examine the effect of corporate governance mechanisms on manufacturing share companies‟
financial performance.
3. Work Plan and Budget Application
3.1 Work plan activities

Table 2: Time Schedules of Activity Plan

No Activities March April May Ju
ne

1 Preparation of proposal 1-10

2 Submission of proposal 10-31

And defense

3 Preparation of Questionnaire, Standardization 1-15

and Data collection

4 Data organization and analysis 15-30

5 Writing , Editing 1-31

6 Thesis Submission 1-
15
3.2 Budget application
3.2.1 Stationery
Table 3. Costs of Stationery Materials
No. Items Measurement Quantity Unite price Total price
unit Birr Cent Birr Cent
1 Printing paper Pkt 2 120 240
3 Note book Number 1 40 40
4 Pen Number 5 7 35
5 Pen(red) Number 1 7 7
6 Dot pencil Number 1 4 4
7 Re- write able CDs Number 2 60 120
8 Flash Number 1 1 250
9 Bag Number 1 1 450
10 Stapler Number 1 120 120
11 Staples Pkt 2 10 20
12 Pins Pkt 1 10 10
13 Eraser Number 2 7 14
Sub Total 1,310

3.2.2. Miscellaneous Expense

Table 4: Miscellaneous Expenses
Description Unite Quantity Total cost
No
1 Communication - - 350
2 Thesis Printing And Binding - 6 1,000
3 Taxi (Transportation) 300.00
Sub total 1,650

3.2.3. Summary of Expenses

Table 5: Total Expenses
No Description Total expenses
1 Stationery 1,310.00
2 Miscellaneous 1,650.00
3 Contingency (10%) 296.00
Grand Total 3,256.00
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AACCSA.(2014). Manufacturing Survey Analysis.Addis Ababa: DAB DRT .

Aggarwal, P. (2013).

Impact of Corporate Governance on Corporate Financial Performance. IOSR Journal of

Business and Management (IOSR-JBM), 01-05.

Al-ahdal, P. M. (2018). Impact of Corporate Governance on Financial Performance of Indian

Electronic Consumer Goods Firms. International Journal of Research, 1-20.

Andersson, M. M. (1999). CORPORATE GOVERNANCE: EFFECTS ON FIRM

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