Corporate governance mechanisms and firm performance: empirical evidence from medium and large-scale manufacturing firms in Ethiopia

Purpose This study aims to examine the impact of corporate governance mechanisms on financial and non-financial aspects firm performance in medium large-scale manufacturing firms Ethiopia. Design/methodology/approach The cross-sectional survey simple random sampling methods are adopted while data collection is through a questionnaire that covers five indicators consisting board independence, effectiveness, shareholders role, internal audit effectiveness (IAE) disclosure transparency. dimensions were indicated by six customer market (CM), process (IP), differentiation, efficiency, competitive position (CP) (organizational) (OP). covariance-based structural equation modeling (SEM) with maximum likelihood parameter estimation technique was used perform analysis. Findings A significant positive relationship has been found between independence directors (especially respect OP, CP IP). However, directors’ showed an unexpected result, negative effect CP, CM IP. also indicates transparency OP. coefficient construct significant. linkage revealed IAE two constructs performance: differentiation CP. One important findings shareholders’ role both characteristics (board effectiveness) (differentiation, OP). Research limitations/implications potential limitations. First, comparison prior studies, this based small sample size which limits generalizability findings. Different scholars have suggested (Anderson Gerbing, 1984, 1988; Iacobucci, 2010; Hair et al. , 2019) SEM requires large test hypothetical model. Thus, future research can further investigate link using larger achieve more reliable results. Second, current quantitative approach only, but studies (e.g. Ahrens Khalifa, 2013) suggest qualitative reach very conclusive idea governance. currently receiving growing popularity literature. Practical implications would measurable for different stakeholders who supporting or regulating firms. give clue about how design good system. managers get hint tip from result might help as input designing strategies. Finally, it policymakers understand think crucial active participation curtailing/reducing agency cost enhancing apart (beyond) conventional directors, audit, transparency). Originality/value seeks extend contribute literature several ways. contrast previous measures thereby providing new empirical insights relating measures. provides direct (i.e. performance. come insight major driver