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dispenses justice according to law without regard to the policies and inclinations of the government of the day…‖(Sir Ninan 1985, cited in Alemayehu 2008). Regarding the Ethiopian judiciary system, Ruecker (2011) stated that the most important provision regarding share issuing and trading is the 1960 Commercial Code of Ethiopia which is outdated and needs significant revision. Addis Ababa Stock Exchange Rules and Regulations Manual (Volumes I and II) were prepared in 1999. However, it is at a working draft level and not up-to-date. There is no system of civil courts where securities cases can be prosecuted by a dedicated governmental authority. There are no specific training programs to educate prosecutors and judges on capital market regulation, including corporate governance. There are commercial courts that specialize in hearing commercial cases, but there are no courts that specialize in hearing only securities law and company law cases. There
26 Tiruneh Legesse are provisions in the jurisdiction‘s laws that may be used to prosecute securities violations. An independent judiciary works free from the interference of the political forces through proper enforcement of law. If the government officials twist the judiciary system to their advantage, one can say that the judiciary system is partial - both in the sense of being biased and in the sense of encompassing less than the whole. Hence, adequate and independent judiciary system fosters the economic, social and political development of the nation. Stock markets and corporate governance The notion of ‗corporate governance‘ refers to the overall legal, institutional and regulatory framework in which the interests of stakeholders surrounding companies are coordinated and protected (Fekadu, 2010). The quality of the corporate governance determines the confidence and willingness of investors to participate in investment and financial markets. Empirical studies have found that investors are willing to pay a premium for the securities issued by a well governed company over a poorly governed company which is otherwise equivalent in terms of financial performance. If investors (domestic and foreign) lack confidence in corporate governance, they are likely to discount the shares that they hold, and that goes in the face of the company‘s ability to raise funds and grow (Lemma and Otchere, 2008). According to Alemayehu (2008), in order to have good governance, it is mandatory to put in place governance institutions such as commercial codes, product market institutions (such as regulators responsible for competition),
JBAS Vol. 4 No. 1 June 2012 27 labor market institutions, financial (capital) market institutions (such as financial intermediaries, and the judiciary). Corporate governance has a number of significances to various stakeholders. Among others, corporate governance can be considered as the basic prerequisite for raising capital from partners and shareholders. Secondly, when business conduct is reliable, stakeholders –particularly financiers –