Determinant of financial performance of commercial banks in Ethiopia: Special emphasis on private commercial banks (original) (raw)
Related papers
2018
The main purpose of this paper is to investigate the bank specific factors which can affect the financial performance of private commercial banks in Ethiopia. A total of 6 private commercial banks (those having well organized financial data till 2017) were purposefully taken & their audited annual financial reports were analyzed for the period of 2011-2017. For this purpose, descriptive statistic, Pearson Correlation Coefficient and Multiple Linear Regression Analytical approaches were applied. In this study, return on equity, return on asset and net interest margin as the dependent variables and bank specific factors like banks size, liquidity management, asset quality, management efficiency and capital adequacy as independent variables were used. Any autocorrelation problem was checked. The results indicated that capital adequacy, management efficiency and size of banks have positive and statistically significant effect on financial performance of private commercial banks of Ethio...
Determinants of the Financial Performance of a Private Commercial Bank in Ethiopia
2015
This study examines the determinants of financial performance of a private commercial bank by using the monthly financial statement of Bank ''X''3 from 2011 to 2016. A quantitative research approach was adopted, and the data were estimated using the Ordinary Least Square approach of multiple linear regression model. The study examined only internal factors such as capital adequacy, loan to deposit ratio, income diversification, operating efficiency, export, liquidity, loan performance and deposit mobilization as explanatory variables. Return on Asset, Return on Equity and Net Interest Margin were used as dependant variables to measure the financial performance of the Bank. The finding of the study revealed that income diversification, deposit amount, export level and loan performance have a significant influence on the financial performance of Bank ''X''. Therefore, it is recommended that commercial banks should increase export proceed, capital and lo...
Determinants of Financial Performance of Private Commercial Banks in Ethiopia
Academy of Accounting and Financial Studies Journal, 2021
This study was aimed to investigate determinants of financial performance of private commercial banks in Ethiopia. The study has employed explanatory research design in quantitative research approach. An audited financial statement of private commercial banks was used for the period 2010 to 2019 to carry out the study. Out of the 16 private commercial banks; eight (8) banks were selected as sample using purposive sampling based on the banks' age and experience. The data were analyzed using descriptive and inferential statistics such as correlation analysis, Random and Fixed effect regression analysis. The finding of the study indicates that microeconomic factors namely; capital adequacy, asset quality, liquidity position and number of bank branch had positive and significant effect on return on asset (ROA) & return on equity (ROE) of private commercial banks in Ethiopia. From macroeconomic factors interest rate had a negative significant effect on return on asset and had no effect on return on equity. Similarly, Gross Domestic Product had negative and significant effect on return on asset (ROE) & had insignificant effect on return on asset (ROA) of private commercial banks in Ethiopia. Therefore, the private commercial banks should give due consideration on improving those internal factors since they significantly and positively affect their financial performance. Similarly, the concerned executive body should get updated information about coming change GDP and interest rate and adjust their bank functions according to change in the environment and be efficient since these factors had negative and significant impact on bank financial performance.
A Study on the Factors Affecting the Financial Performance of Select Commercial Banks of Ethiopia
This study examines the Analysis on financial performance determinants: A study on selected commercial Banks in Ethiopia. Among the total of 17 public and private sector banks by using Purposive sampling technique 9 banks have been selected for the study. Quantitative research approach was adopted by using secondary data by using panel data of banks over a period of ten years (2006-2015). The fixed effect model was chosen rather than random effect model based on the hausman specification test result. In order to realize the objectives of the study multiple regression models was employed. Banks specific factors considered CAMEL approach and the key macroeconomic factors such as gross domestic product, inflation rate and foreign exchange rate were also included to analyze the banks financial performance in terms of ROA and ROE, Accordingly, the result revealed that Capital adequacy has positive and significant impact on bank financial performance of return on asset, and Earning ability and liquidity management has negatively and significant impact on bank financial performance of return on equity, On the other hand, variables such as Gross Domestic Variable has positively impact on both return on asset (ROA) and return on equity (ROE).
Investigating the Determinants of Commercial Banks Profitability in Ethiopia
European Journal of Business and Management, 2019
This study is conducted aiming at investigating the determinants of commercial banks profitability in Ethiopia on the bases of secondary data obtained from nine sample commercial banks over the period of 2007 to 2016 using CAMEL model. While the profitability of commercial banks is influenced by internal and external factors, this study focuses only to examine the effect of internal factors on the profitability of Ethiopian commercial banks. For this purpose, ordinary least square technique (OLS) is utilized in this study to estimate the influence of Capital adequacy, Asset quality, Management Efficiency, Earning ability, and Liquidity proxied by Total Capital to Total Assets, Non-performing Loan to Total Loan, Total Loan to Total Deposit, Interest Income to Total Assets, and Liquid Asset to Total Assets ratios respectively on Earning per Share (profitability indicator of the commercial banks). Moreover, the results of this study are dealt with descriptive statistics, Pearson correlation, and Regression Analysis. Further, SPSS version 20 is employed to analyze and present the data. The empirical results seemed to comprehend that while total capital to total asset and total loan to total deposit ratios have a positive correlation with the dependent variable (EPS), interest income to total asset, non-performing loan to total loan, and liquid asset to total assets ratios are negatively associated with the dependent variable. Moreover, the findings of the study indicated that only total capital to total asset and liquid asset to total assets ratios have significant impact on the profitability of commercial banks in Ethiopia.
Determinants of Commercial Banks Financial Performance in Ethiopia
2016
This study examines the determinants of financial performance of commercial banks in Ethiopia by using panel data of seven sample commercial banks out of eighteen commercial banks operated in Ethiopia over the period 2000-2014. Since the data is secondary in nature, the quantitative approach to research was used. Besides, the random effect model was used. Under this study, both internal and external factors were included. The internal factors used in this study include capital adequacy, Asset quality, Earning ability, liquidity management and Bank size whereas, the external factor is foreign exchange rate. Moreover, ROA, ROE and NIM were used to measure the financial performance. This study runs a redundant fixed effects test using Hausman specification test. Hence based on the result random effect model was adopted. Based on the regression result; asset quality, earning ability and bank size have a significant influence on the financial performance of Ethiopian commercial banks mea...
The Determinents of Commertial Banks Financial Performance in Ethiopia
2020
The study was attempted to investigate determinants of financial performance of commercial banks in Ethiopian by using secondary data. The data were obtained from audited financial statements of five sampled commercial banks for the period of 1997 to 2017 and National Bank of Ethiopia. The study used return on assets (ROA) and return on equity (ROE) as dependent financial performance variable. Moreover, the study used bank specific variables as explanatory variables. Both descriptive statistics and econometrics model specifically fixed effects estimation were used to analyze the relationships of dependent variable with explanatory variables. The major findings of the study shows that bank specific determinants were very important in explaining financial performance of commercial banks. The management efficiency, customer deposit to total asset ratio, capital adequacy ratio, loan to deposit ratio were positively and significantly related to bank’s financial performance. The study ...
Determinants of Commercial Bank Financial Performance: Empirical Evidence From Ethiopia
The study examines factors that determine the financial performance of commercial banks in Ethiopia by using time series data over the period 2004-2019 on the sample of seven banks using secondary data. Moreover, the autoregressive distributed lag model was used. Under this study, both internal and external factors were included as the determinants of bank performance which was measured by loan-to-deposit ratio. The internal factors used in this study include capital adequacy ratio, non-performing loan and loan growth while the external factors are real GDP growth and inflation. Based on the results, specific variables except non-performing loan capital adequacy and loan growth affect banks performance significantly in the long run. In the short run, in addition to those two variables, non-performing loan also affects bank performance. Real GDP growth has negative significant effect on the banks performance in both long and short run. Inflation has insignificant effects on bank performances in both long and short run.
Determinants of Financial Performance: An Empirical Study on Ethiopian Commercial Banks
2014
This study examines the determinants of financial performance of commercial banks in Ethiopia by using panel data of banks over the period 2002-2013. Since the data is secondary in nature, the quantitative approach to research was considered. Besides, the fixed effect model was used. The fixed effect model is preferred to the random effect model based on the hausman specification test. Under this study, both internal and external factors were included. The internal factors used in this study include capital structure; Income Diversification, operating cost and bank size whereas the external factors are effective tax rate, real GDP growth and inflation. Moreover, ROA and NIM were used as the performance measure. Based on the regression result, all bank specific variables except bank size affect performance of the bank significantly but negatively. However, bank size affects performance significantly and positively. In addition to this, macroeconomic factors have no significant effect on the performance of banks except the tax rate which negatively but significantly affects ROA.
International Journal of Accounting, Finance and Risk Management, 2020
This study was aimed at measuring the financial performance of some selected private banks in Ethiopia. The financial performance of selected banks has been measured by using the five too important components of financial measures; those are capital adequacy, asset quality, management capacity, earning capacity and liquidity of banks. To this end necessary audited financial statements and related disclosures of selected private banks, which were prepared in line with international financial reporting standards for three consecutive years from 2017-2019 have been used. The collected secondary data have been analyzed by using a ratio analysis model. In line with comparison of selected private banks each other, the study revealed the following results. When Capital adequacy is used as a performance measure, comparatively Addis international bank is treated as capitally adequate and safe for creditors and depositors in repaying the loan what it is received. Abay bank, Dashen bank and Abyssinia bank jointly treated as relatively safe and capitally adequate next to Addis international bank. In terms of asset quality, awash international bank relatively treated better in managing credit followed by bank of Abyssinia and Addis international bank. When management efficiency is used as a performance measure of banks, Addis international bank is comparatively efficient in utilizing its assets to generate income a lot as compared to the remaining banks under study. In its earning quality, awash international bank has selected as the leader of the remaining banks. The study also concludes the performance of banks in terms of liquidity as one component of CAMEL, based on the analysis Abay bank outperforms the remaining banks.