Effect of E-Banking Service on Financial Performance of Commercial Banks: A Case of Selected Private Commercial Banks in Ethiopia

This study examines the impact of e-banking services on the financial performance of selected private commercial banks in Ethiopia. It focuses on the roles of ATM, POS, Internet Banking (IB), Debit Card (DC), and Mobile Banking (MB) services. Financial performance is evaluated using Return on Assets (ROA) and Return on Equity (ROE) as key indicators. A panel dataset was collected from six purposely selected private commercial banks: Awash Bank S.C., Bank of Abyssinia, Dashen Bank, Cooperative Bank of Oromia, United Bank, and Zemen Bank S.C., covering the period from 2018 to 2023. Utilizing a quantitative approach and employing both descriptive and explanatory research designs, the study applies fixed and random effects regression models estimated with E-Views 13. The findings indicate that POS terminals have a significant negative effect on both ROA and ROE, suggesting that investments in POS infrastructure may not be generating the expected financial returns. In contrast, ATMs, debit cards, and internet banking services exhibit a significant positive impact on both profitability measures, highlighting their effectiveness in enhancing bank performance. Interestingly, mobile banking shows a mixed effect; it positively influences ROA but negatively and significantly affects ROE, indicating potential inefficiencies or cost challenges in mobile banking deployment. This study contributes original insights to the existing literature by providing context-specific findings from Ethiopia, particularly regarding the differing effects of mobile and POS banking services compared to previous research. It enriches the discussion on the strategic role of digital banking technologies in shaping the financial outcomes of banks operating in emerging markets.

This study analyzes the performance and financial credibility of Private Commercial banks in Ethiopia for the period of 2013-2019. This period is taken to consider the political instability and social unrest in the country. As one of the most popular methods for measuring banking performance, CAMELS method is used to analyze the performance of the banks. The good performance of the financial institutions must for the sustainable growth of economy Therefore, this research paper makes analysis of performance of selected private banks in Ethiopia under political instability. The finding indicates that performance of banks in 2016 were decreased than any other year in terms of profit, profit per employee, loan and net income. Cost to income ratio increased. The result implies employee productivity of banks were decreased in 2016, where there were high social and political unrest in the country. Therefore, banks should not concentrate in a single region and has diversify their operations across regions. Keywords: financial performance, CAMEL approach, Political instability, private banks DOI: 10.7176/RJFA/12-19-04 Publication date: October 31 st 2021

The main objective of this study is to examine the effect of ownership structure on financial performance of Ethiopian commercial banks. Hence, the financial performance of state owned commercial bank was compared with privately owned commercial banks in Ethiopia based on key financial performance measures. In order to achieve the stated objective, the study adopts a quantitative research approach by using financial ratio analysis and test for means equality analysis techniques. Samples of fifteen commercial banks were selected based on the year of establishment. Audited financial statement data covering from 2011 to 2017 analyzed. The result reveal that ROEs of public sector bank was higher than those of private banks but the overall performance of state owned bank was not observed sound because other financial ratios including ROA, LDR, CDR, CAR and NIM, of most of the private banks were found superior. Other findings of the study show that there is a significance difference between the financial performance measures like ROE, CDR, LDR, CAR, EIR and NIM between states owned CBE and the privately owned banks in Ethiopia. In terms of ROA, not statically significant difference between state owned and private commercial banks in Ethiopia over the studied period.

In the modern economy, banks play an important and indispensable role in the expansion of financial services, and to nation’s overall economic prosperity. This study aimed to investigate how financial strategies affect the profitability of private commercial banks in Ethiopia. In order to eliminate heteroscedasticity, autocorrelation, and other endogenous issues, the researchers used the generalized method of moment (GMM) technique. Data was collected from the websites of 16 private commercial banks from 2016 to 2021. For this research purpose, a quantitative technique and an explanatory design were used. The result of this study helps the bank expand operations, lower input costs, increase profitability, and raise productivity. Furthermore, the results have provided higher authorities with guidance on how to evaluate financial judgments and ratios in order to improve the profitability of their banks. The findings demonstrated that the profitability of private commercial banks in Ethiopia is significantly and favorably impacted by financing, investing, and dividend strategies. The study concludes that financing, investing, and dividend strategies all have an impact on the profitability of private commercial banks in Ethiopia. Therefore, private commercial banks in Ethiopia should fund their assets through debt, make investments in ideal assets, and distribute profits to their shareholders.

The major objective of the present study is to examine the impact of internal and external board composition on financial performance of commercial banks in Ethiopia. The samples selected for the present study are twelve commercial banks based on ten years financial report for the period of 2009-2018. Both primary and secondary data collection methods employed for the study. Primary data for corporate governance (board compassion) which is independent variable and secondary data for bank financial performance Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM) dependent variables of the present study. Explanatory type of study with a quantitative approach was employed to analyze the collected data. Both descriptive and econometric analyses are used for the current study. Descriptive analysis includes mean, maximum, minimum, and standard deviation, whereas, econometric model includes correlation and regression analysis. Fixed effect and random effect econometric analysis has been made using Eviews-9 Software. The present study shows that there is a linear relationship between board compassion (independent variable) and commercial banks financial performance as measured by Return on Assets (ROA). From this, the researcher reveals that there is a positive and statistically significant relationship between board composition and Return on Assets (ROA). There is negative and statistically insignificant relationship between board composition and Return on Equity (ROE) of commercial banks in Ethiopia. Board Composition is negatively correlated with Net Interest Margin (NIM) and statistically significant at 5 % level of significant. The present study concludes that the higher the board composition leads to better financial performance as measured by Return on Assets (ROA), but in contrarily the higher the board composition of commercial banks in Ethiopia decreases the financial performance as measured by Return on Equity (ROE) and Net Interest Margin (NIM).

The main objective of this study was to evaluate and compare the financial performance of commercial banks in Ethiopia during the implementation of growth and transformation plan II. Moreover, determinants of financial performance were examined. The study was conducted using secondary data obtained from the National Bank of Ethiopia, and the official website of each commercial bank. Multiple panel regression and independent sample t tests were used to show the relationship and to compare the financial performance of commercial banks between the study periods. The ratio of non-interest expenses to total expense, log_net profit per employee, interest income to total income, and exchange rate were variables with a positive and significant effect on the financial performance of commercial banks, while log_total loans per branch and inflation affected negatively the financial performance measured by return on assets. Whereas, the ratio of debt to equity, log_net profit per employee, total liquid assets to total deposits, interest income to total income, and exchange rate have a positive and significant impact, while the ratio of loan loss provision to total loan, log_total loans per branch, and inflation negatively and significantly affected financial performance measured by ROE. The independent sample t test shows that except for the ratio of total loans to total deposits and total capital to total assets, the remaining variables did not show significant differences between state and publicly owned banks.

The paper focus on the effect of bank innovation on financial performance of commercial banks in Ethiopia. The study adopted an explanatory and descriptive research design with quantitative research approach. the study referenced to Ethiopian commercial banks on basis of data covers five years (2018-2022) period and the data was gotten from the reports of the regulatory body of the banks in Ethiopia i.e. the National Bank of Ethiopia (NBE), Central Statistical Authority, Ministry of Finance and Economic Cooperation and from others that are as secondary data sources from the seventeen commercial banks of Ethiopia. The Target population was all commercial banks that engage in commercial activities and registered by National Bank of Ethiopia to act. Consequently, seventeen commercial banks, out of the thirty one commercial banks, have purposively were selected for the study. The methods of analysis applied a panel least square regression using STATA vs 12 to test whether random effect or random effect regression. And the model were a random effect model selected. The finding were agent banking, Mobile banking users and Gross Domestic product were found positive effect on financial performance of commercial banks and statistically significant. Bank Liquidity negative effect on financial performance of commercial banks but statistically significant. ATM machine terminals, RTGS users, agent banking and Bank size were found positive effect on financial performance of commercial banks but statistically insignificant. Internet banking and Inflation negatively effect on financial performance of commercial banks and statistically insignificant.

The systematic review aims to systematically review the effect of financial innovation on the financial performance of commercial banks in Ethiopia from 2015 to 2024. Utilizing the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) framework, the review meticulously identifies, screens, and selects relevant studies to provide a comprehensive synthesis of existing literature. The study revealed that financial innovation (ATM, mobile banking, internet banking and debit cards) are frequently explained and significantly influencing the financial performance of commercial banks in Ethiopia. The findings reveal a growing but uneven interest in financial innovation research, with a predominance of empirical studies and limited theoretical frameworks. The review highlights significant knowledge gaps and suggests directions for future research to enhance understanding and application of financial innovations in the Ethiopian banking sector.

This study aims at examining the determinants of the financial performance of private commercial banks in Ethiopia. The study uses secondary data for eight private banks which are in the industry for more than ten years. These banks are chosen from sixteen private commercial banks which are currently functional in Ethiopia banking industry. The data for this study is obtained from annual reports of the banks, minutes and the national bank report. Correlation and multiple linear regressions of panel data for the eight banks for the years 2007 to 2016 is analyzed using random effect model. E-Views 9 software was used for analyzing the data. Return on Asset and Return on Equity are the selected dependent variables while non-performing loan, capital adequacy ratio, bank size, leverage ratio, credit interest income ratio, loan loss provision ratio and operation cost efficiency were the independent variables. Results show that Capital Adequacy Ratio (CAR), Credit Interest Income (CIR) and Size of the bank (SIZE) have positive and statistically significant effect on financial performance. Non-performing Loans (NPLs), Loan Loss Provision (LLP), Leverage Ratio (LR) and Operational Cost Efficiency (OCE) have negative and statistically significant effect on banks' financial performance. The study suggests that Ethiopian commercial banks are advised to manage their loan loss, be cost efficient, and fix their leverage ratio at maximum level to enhance their profitability. Key words: Ethiopia, commercial banks, determinants, financial performance.

The main objective of this study was investigating factors that determine the dividend payout of private commercial banks in Ethiopia under the study period covering from 2009 to 2017. A balanced panel data set from national bank of Ethiopia and ten private commercial banks annual report was used and analyzed through fixed effects panel data regression technique. Dividend payout was used as a dependent variable and the independent variables covered under this study were both bank specific (profitability, leverage, liquidity, size and last year dividend payout) and macroeconomic factors (inflation rate, real GDP growth rate and foreign exchange rate). The finding shows that from bank specific factor; profitability, liquidity, bank size and last year dividend payout have statistically significant positive effect on dividend payout while leverage shows insignificant positive effect for dividend payout. From macroeconomic variables inflation rate have a positive effect, but the real GDP growth rate, and foreign exchange rate have a negative effect and foreign exchange rate is the only significant macroeconomic factor for dividend payout.The results of this study have delivered some insights on the effects of both bank specific and macroeconomic factor for dividend payout of private commercial banks in Ethiopia and managements and board of directors of those banks need to consider these variables while designing their dividend payout. In addition, government body specially financial sector should have to consider the effct of macroeconomic variables on dividend payout when they are making a policy about macroeconomic issues. Keywords : Commercial Banks, Bank Specific determinant, dividend payout and macroeconomic determinants. DOI: 10.7176/RJFA/12-3-03 Publication date: February 28 th 2021

Evidence shows that financial inclusion plays a key role in driving economic growth and social development by strengthening the financial system and reducing poverty and income inequality. However, its impact on the financial performance of banks remains inconclusive. This paper explores the relationship between financial inclusion and the financial performance of commercial banks in Ethiopia, using a sample of 16 banks. We analyse 10 years of data (2013–2022) collected manually from the National Bank of Ethiopia (NBE) and the annual reports of commercial banks. A two-step system Generalized Method of Moments (GMM) is employed, alongside other linear panel data model estimators. The findings reveal that increased financial inclusion has a significant positive impact on the financial performance (ROA and ROE) of commercial banks in Ethiopia. The GMM estimation result also shows that bank performance indicators (ROA and ROE) are positivelyassociated with their past realizations. Regarding bank-specific control variables, the cost-efficiency ratio has a significant negative impact on bank profitability. The study recommends that banks improve accessibility by expanding branch networks and ATMs and by offering innovative financial products to enhance profitability.

Deteriorating loan portfolio quality is negatively impacting the financial performance of commercial banks in Kenya. Though, Kenya’s banking sector is well established and plays key part in developing county’s economy, it is facing constraints in terms of absolute growth due to this declining loan portfolio quality. Consequently, stakeholders of these commercial banks especially creditors, depositors and shareholders are incurring huge financial losses in absolute terms on their deterioration. Although, there are studies that have established the factors that affect commercial banks’ financial performance, until the time of the study there were unresolved issues. This calls for commercial banks need to be proactive like modernizing their risk mitigation measures to more precise measures to deal with expected credit losses. Banks need to change in this time of enhanced financial information, computing power and data analytics for best-in-class fair projection of credit risk for tangible competitive benefits. Study has demonstrated need for robust approach to commercial banks’ lending in dynamic financial markets for sustainable commercial banking financial performance in Kenya. Study aimed at assessing loan portfolio quality on financial performance of commercial banks in Kenya. Study objectives were to: determine significance of loan loss provision on financial performance of commercial banks in Kenya, evaluate allowance for loan loss impact on financial performance of commercial banks in Kenya and gauge bearing of gross impaired loans and advances on financial performance of commercial banks in Kenya. Researcher classified loan portfolio quality indicators as independent variables, regulatory frameworks, market and infrastructural dynamics as intervening variables, and measures of financial performance of return on assets and equity of commercial banks in Kenya as dependent variables. Research utilized descriptive design using percentages, mean, standard deviation, correlations, and panel data regression model. Researcher narrowed down targeted population to 38 fully operational commercial banks in Kenya by end of year 2020. Study applied census approach and relied on published audited financial reports. Researcher used document review secondary data collection tool and analysed data using SPSS program Version 24.0 supported by Microsoft excel windows 2010. Tables and figures were used to present study outcome. There was largely positive significant correlation between each independent and dependent variable proxies. Although on contrary, allowance for loan loss and gross impaired loans and advances association with return on equity were positive and negative insignificant correspondingly. Study general conclusion was that loan portfolio quality largely had positive significant association with Kenya’s commercial banks’ financial performance. Ccoefficient of determination of return on assets and return on equity were 0.1620 and 0.0363 respectively. That meant loan portfolio quality was responsible for 16.20% and 3.63% change in Kenya’s commercial banks’ financial performance in terms of return on assets and equity respectively. Overall, it is resolved, loan portfolio quality parameters; loan loss provision, allowance for loan loss and gross impaired loans and advances are determinants of financial performance (return on assets return on equity) of Commercial banks in Kenya.The study recommends management of these banks need to vigorously pursue measures to effectively manage loan portfolio quality to realise rising returns on assets and equity.

Corporate governance has become subject to the development agenda of most developed and developing countries economy, due to the fact that corporate governance structure of a firm has critical impact on its financial performance. Corporate governance mechanisms emerge to tackle agency problems in ensuring that shareholders’ funds are not expropriated or wasted on unprofitable activities. The results of most research studies reveal that, well governed firms have been noted to have higher firm performance than poor governed firms. However, there are different researchers who opposed this idea as they have found mixed results on the relationships between different variables of corporate governance and financial performance. Research studies on this issue in developing countries; especially in Ethiopia remained an ignored area from empirical research. Thus, this study examined the effect of corporate governance mechanisms on firms’ financial performance on the selected commercial banks in Ethiopia by taking a sample of 6 commercial banks starting from the year 2003 up to 2009. This study used return on asset, return on equity and operating profit margin as dependent variables to measure financial performance of commercial banks and board size, board independence, frequency of board meetings, chief executive officer duality, audit committee and board ownership as independent variables to express quantitatively corporate governance mechanisms. In addition, firm size, financial leverage and firm growth rate were used as control variables, which are specific to commercial banks and general to the economy as a whole. The researcher used both correlation analysis and pooled panel data regression models of cross-sectional and time series data for analysis. The results provide evidence that board size is negatively and significantly related with all the three indicators of financial performance- return on asset return on equity and operating profit margin. Audit committee and financial performance indicators-return on asset and return on equity is negative and statistically significant, but it is not significant with operating profit margin. Board independence, chief executive officer duality and board ownership are positively and significantly related with all the three financial performance indicators. However, frequency of board meetings is not statistically significant with all the three financial performance indicators. Keywords: Corporate Governance Mechanisms, Agency Problem, Firms’ Financial Performance and Commercial Banks. DOI : 10.7176/RJFA/10-21-05 Publication date: November 30 th 2019

Corporate governance has become subject to the development agenda of most developed and developing countries economy, due to the fact that corporate governance structure of a firm has critical impact on its financial performance. Corporate governance mechanisms emerge to tackle agency problems in ensuring that shareholders’ funds are not expropriated or wasted on unprofitable activities. The results of most research studies reveal that, well governed firms have been noted to have higher firm performance than poor governed firms. However, there are different researchers who opposed this idea as they have found mixed results on the relationships between different variables of corporate governance and financial performance. Research studies on this issue in developing countries; especially in Ethiopia remained an ignored area from empirical research. Thus, this study examined the effect of corporate governance mechanisms on firms’ financial performance on the selected commercial banks in Ethiopia by taking a sample of 6 commercial banks starting from the year 2003 up to 2009. This study used return on asset, return on equity and operating profit margin as dependent variables to measure financial performance of commercial banks and board size, board independence, frequency of board meetings, chief executive officer duality, audit committee and board ownership as independent variables to express quantitatively corporate governance mechanisms. In addition, firm size, financial leverage and firm growth rate were used as control variables, which are specific to commercial banks and general to the economy as a whole. The researcher used both correlation analysis and pooled panel data regression models of cross-sectional and time series data for analysis. The results provide evidence that board size is negatively and significantly related with all the three indicators of financial performance- return on asset return on equity and operating profit margin. Audit committee and financial performance indicators-return on asset and return on equity is negative and statistically significant, but it is not significant with operating profit margin. Board independence, chief executive officer duality and board ownership are positively and significantly related with all the three financial performance indicators. However, frequency of board meetings is not statistically significant with all the three financial performance indicators. Keywords: Corporate Governance Mechanisms, Agency Problem, Firms’ Financial Performance and Commercial Banks. DOI : 10.7176/RJFA/10-19-03 Publication date :October 31 st 2019

This research was conducted to investigate the effect of asset liability management on profitability of private commercial banks in Ethiopia by using panel data of seven private commercial banks in Ethiopia from year 2005 to 2017 G.C.The study used audited annual financial report of selected banks and analyzed by using multiple regression models moreover, net interest income, was to measure profitability.Fixed effect regression model was applied to investigate the effects of Asset Liability factors on banks, by employing statistical Cost Accounting model for the sampled banks. To conduct the study quantitative research method was employed and explanatory research design was used in trying to establish the causal effect relationship between profitability and asset liability management variables The study utilized panel data analysis methodology in attest conclusions about the effect of the explanatory variables on the dependent variable. The study revealed that loan and advances, deposit in foreign banks, and investment in security had a statistically significant and positive except loan and advance effect on net interest income, whiledemand deposit had a statisticallysignificant positive effect on net interest income. Whereas saving deposit and fixed deposit from the liability part, don’t have statistically significant positive effect on profitability as measured by net interest income.Therefore, Bank managers are advised to give due attention to the statically significant positive variables (I.e, deposit in foreign bank, investment in security) to Improve profitability. Keywords:- Profitability, Private commercialbanks, asset liability management, Ethiopia DOI: 10.7176/RJFA/11-9-04 Publication date: May 31 st 2020