Rethinking Corporate Governance in Ethiopia

Abstract

This paper deals with the corporate governance thematic area of the African Peer Review Mechanism (APRM). Its contribution to the literature is twofold: (1) It provides additional evidence that a microeconomic perspective of studying governance leads to a better understanding of key reform issues in many Sub Sahara African (SSA) economies; and (2) With regard to Ethiopia, the paper surmises that the overall standard of corporate governance is disappointing. More specifically, the legal and constitutional instruments do not provide adequate legislative; key international conventions and standards are not ratified; political parties own substantial number of business enterprises and operate in key sectors of the economy; ownership concentration through pyramid structure introduces particular problems of agency and creates crony capitalism; investor and creditor protection laws are inadequate; the absence of organized equity market is a serious void, and finally with regard to professional education, the increase in the number of tertiary institutions granting degrees and diplomas is not matched by sound quality standards. The reform debate will have to find solutions to these problems.