Agency and Bank Liberalization: The Case of Ethiopia

Posted: 15 May 2008

See all articles by Minga Negash

Minga Negash

Metropolitan State University of Denver; University of the Witwatersrand

Date Written: March 2008

Abstract

This paper extends the agency theory of Jensen and Meckling (1976) to the Ethiopian financial sector, analyzes the degree of the sector's fragility and raise the reform issues of the day. Based on grounded theories and following a qualitative methodology, the paper confirms that Ethiopia's finance sector is dominated by a single state owned bank (SOB), finds that the form of agency relationship is complex, and argues that the draft banking law needs to aim at addressing the problems of ownership and managements on one hand and capital structure on the other hand. The paper proposes that the Commercial Bank of Ethiopia be privatized in a specific way and optimal board size and significant influence criteria be applied in sorting out board structure and ownership conceration in all banks.

Keywords: bank, liberalization, Ethiopia

JEL Classification: G18, G21, G32, G33

Suggested Citation

Negash, Minga, Agency and Bank Liberalization: The Case of Ethiopia (March 2008). Available at SSRN: https://ssrn.com/abstract=1132249

Minga Negash (Contact Author)

Metropolitan State University of Denver ( email )

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University of the Witwatersrand

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South Africa

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