Determinants of the Financial Performance of Private Commercial Banks in Ethiopia: Bank Specific Factors Analysis

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Abdu Mohammed Assfaw
Abdu Mohammed Assfaw

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Determinants of the Financial Performance of Private Commercial Banks in Ethiopia: Bank Specific Factors Analysis

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Abstract

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 Ethiopia measured by ROA, ROE and NIM. But, liquidity management has negatively significant impact on financial performance of the banks (ROE). Finally, the study also depicted that asset quality was not statistically significant determinant of sound financial performance of private commercial banks in Ethiopia. Therefore, due attention should be given in ensuring adequate capital, optimum liquidity, efficient expense management system and adequate size of assets by commercial banks for better performance and profitability in their own area of business.

References

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Abdu Mohammed Assfaw. 2018. \u201cDeterminants of the Financial Performance of Private Commercial Banks in Ethiopia: Bank Specific Factors Analysis\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 18 (GJMBR Volume 18 Issue C3): .

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Issue Cover
GJMBR Volume 18 Issue C3
Pg. 55- 67
Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-C Classification: JEL Code: G10
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v1.2

Issue date

May 31, 2018

Language
en
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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 Ethiopia measured by ROA, ROE and NIM. But, liquidity management has negatively significant impact on financial performance of the banks (ROE). Finally, the study also depicted that asset quality was not statistically significant determinant of sound financial performance of private commercial banks in Ethiopia. Therefore, due attention should be given in ensuring adequate capital, optimum liquidity, efficient expense management system and adequate size of assets by commercial banks for better performance and profitability in their own area of business.

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Determinants of the Financial Performance of Private Commercial Banks in Ethiopia: Bank Specific Factors Analysis

Abdu Mohammed Assfaw
Abdu Mohammed Assfaw

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