Private Commercial Banks In Ethiopia Research Articles

Corporate Governance Engineering and Financial Performance: A Study of Private Commercial Banks in Ethiopia

Corporate Governance Engineering and Financial Performance: A Study of Private Commercial Banks in Ethiopia

Competition, Survival Issue, and Performance Constraints of Banks: Evidence from Ethiopian Private Commercial Banks

Banks are financial institutions that are crucial to the accomplishment of development objectives because they transfer money from surplus to deficit parties. This study examines the competition, survival, and performance constraints of commercial banks in Ethiopia using the DEA and CAMEL frameworks from 2015 to 2020. The nonparametric (DEA) approach was applied to approximate the overall technical efficiency score of the banks under consideration. The empirical study used twelve private commercial banks operating in Ethiopia, excluding four banks because of a lack of appropriate and audited financial data and no risk assessment between the study periods. The result of the study reveals that under CRS, except for Abyssinia, Anbesa, and Nib International Banks, the remaining banks are more efficient. Under VRS, while Abyssinia Bank was less efficient, other banks were found to be more efficient. Under scale efficiency, Abyssinia, Anbesa, and Nib International Banks were found to be less efficient, while the remaining banks were more efficient. The composite ranking of the CAMEL framework portrays that Awash International Bank, Zemen, and Wegagen Banks were found in the top three ranks, while Cooperative Bank of Oromia, Dashen, and Abyssinia Banks were found in the bottom position. The regression result demonstrates that the ratios of total capital to total assets, loans to assets, total loans to total deposits, and CAR have a positive effect on bank profitability, whereas the ratio of total loans to the number of branches has a statistically negative and significant influence on the return on assets.

Impact of working capital management on profitability of private commercial banks in Ethiopia

Working capital management is an important financial management decision for the profitability of commercial banks. The purpose of this study is to examine the impact of working capital management on commercial banks' profitability. The study used secondary data from audited financial statements of five private commercial banks in Ethiopia covering the period from 2011 to 2020. The banks were selected on a convenience basis. The financial information from the banks was analyzed to determine the impact of the current ratio, bank size, a current asset-to-total asset ratio, loans and advances to total asset ratio, and current liabilities-to-total assets ratios on profitability. The researchers applied descriptive statistics and inferential statistics. The data were analyzed using the Stata data processing package. An econometric model is applied to examine the impact of working capital management on the profitability of commercial banks. A random effect model was employed and the result revealed that bank size and loans and advances to total assets were found to have a significant impact on banks' profitability. The current ratio, a current asset-to-total asset ratio, and current liabilities-to-total assets ratios were found insignificant to influence banks' profitability. Since the profitability of the banks depends on working capital management, rigorous attention should be given to those factors that influence the profitability of commercial banks.

Intellectual capital and its effect on the financial performance of Ethiopian private commercial banks

Intellectual capital and its effect on the financial performance of Ethiopian private commercial banks

Balance sheet and income statement effect on dividend policy of private commercial banks in Ethiopia

Balance sheet and income statement effect on dividend policy of private commercial banks in Ethiopia

HRM as a strategic business partner: insights from selected private commercial banks in ethiopia

The HRM function is evolving from an administrative function that focuses on legal compliance to a strategic function that requires HR to be a strategic partner in improving business performance. However, there are still organizations that consider HRM merely a cost driver rather than a value-adding function. This study attempts to examine whether HRM is playing its strategic role to enhance competitive advantage in the selected private commercial banks and to assess the contributing factors for HRM to execute its function as a strategic partner. Data was collected by using a selfadministered questionnaire that was designed and distributed to employees of the HR department in the selected private commercial banks. The results of the study confirmed that HR involvement, mindset, competence, and role balance are enablers and contributors for HR to become a strategic partner. Furthermore, the finding indicates that mindset and competence can impact the role of HR as a strategic partner at large. It was further found out that the current status of HRM as a strategic partner is at its moderate level because its enablers do not exist at a higher level. Accordingly, the role of HRM as an administrative expert is still dominantly played as compared with that of a strategic partner, but it is observed that HRM is progressing towards a more strategic function than the administrative function. To realize the full strategic partnership of HRM therefore, HRM work units of private banks are recommended to exert more effort to continue with the current progress in shifting HRM function from routine administrative function towards strategic function by capitalizing on the enablers of HR strategic business partners such as mindset, competence, HR involvement, and role balance.

Financial Performance Analysis of Selected Private Commercial Banks in Ethiopia: Using a CAMEL Rating Approach

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

CAPITAL STRUCTURE AS DETERMINANT OF FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN ETHIOPIA (A CASE STUDY ON PRIVATE BANKS IN ETHIOPIA)

A lot of studies have actually been done by numerous researchers both in developed and developing countries such as Ethiopia to ascertain the empirical relationship existing between capital structure and firm performance with varying samples and period as well as application of several and divergent statistical estimation. This study is based on the identification of the impact that capital structure have on the financial performance of commercial banks in Ethiopia. In this regard, secondary data is collected from varied sources especially annual reports of the private commercial banks in Ethiopia. The literature review is done in the report, and it is identified operating, and the capital structure heavily affects net profit. Apart from this, return on equity, asset and capitals employed also affected by the capital structure of the banks. Regression analysis and descriptive analysis tools are used to analyse the data that is related to the sixteenprivate commercial banks in Ethiopia. On analysis of data, it is identified that operating and net profit is heavily affected by the capital structure. However, in the case of return on asset, return on equity, and return on capital employed, such kind of relationship is not observed. Thus, it is concluded on the basis of entire work that capital structure have the huge impact on the operating and net profit, but it does not put any large impact on the return on asset, return on equity and return on capital employed. The study recommended that banks follow a specific policy, in order to maintain a balance in the capital structure. It is also recommended that managers must keep a keen eye on the changes that are taking place in the capital structure.

Bank Specific Determinants of Internal Audit Effectiveness: Evidence from Private Banks in Ethiopia

This study has examined factors that affect internal audit effectiveness in the Ethiopian private commercial banks. Five hypotheses were formulated based on a comprehensive review of past literature. The study used primary sources of data through questionnaires. A cross-sectional survey design was employed, purposive sampling method was used and data were collected using structured questionnaires, with total of 168 questionnaires were distributed to internal auditors of all Private commercial banks, and 147 (a 87.5% response rate) had collected. The data was analyzed through with SPSS version 20 and regression analyses were carried out to examine the attributes of internal audit effectiveness. All of independent variables are making 60% explained internal audit effectiveness. The study found that there are significant positive relationships between the factors (Independence and objectivity of internal auditors, Competency of internal audit staffs, Existence of audit committees) and internal audit effectiveness. However, Organizational Setting and Management support have no significant effect on internal audit effectiveness. But, private commercial banks should understand that the contributions of these variables were collectively significant to identify any non-compliance activities in their office and to add values for the internal audit effectiveness. This study provides useful information to practitioners and academics who are interested in identifying the determinants of internal auditing effectiveness. Keywords : Internal audit effectiveness, independence and objectivity, organizational setting and Audit committees. DOI: 10.7176/EJBM/13-5-04 Publication date: March 31 st 2021

The Determinants of Dividend Payout: Evidence from Private Banks in Ethiopia

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

Determinants of Bank Credit Growth in Ethiopian Private Commercial Banks

This study is mainly aimed to investigate factor that determine the growth of credit of private commercial bank of Ethiopia by using data for 9 years by Eviews through the use of OLS. Both descriptive and econometric analysis has been applied in order to investigate factors that determine growth of loan in the case of private commercial banks in Ethiopia. As determinants GDP, Inflation, Bank liquidity, population growth rate, unemployment rate and deposit growth were included. The result of the econometric result indicates GDP, inflation, bank liquidity and deposit growth are found to have significant positive impact for the growth of private banks credit. However, population growth rate has a positive but insignificant effects on credit growth, contrarily unemployment rate has a negative and insignificant effect on credit growth of private commercial banks. The study recommends policymakers should control variations in Economic growth and inflation to maintain the stability of credit flows to the different sector. Clearly, these variables are closely linked to monetary policy actions, and the results generally show that macroeconomic stability is vital for the flow of credit in Ethiopia. Keywords: Credit growth, private banks and macro-economic factor DOI: 10.7176/DCS/11-2-03 Publication date: February 28 th 2021

Determinants of Dividend Payout Ratio: Empirical Evidence from Ethiopian Private Banks"

This study empirically examines the effect of firm specific and macroeconomic factors on dividend payout decision of the Ethiopian private commercial banks. Using panel data on eight private banks covering 2008 – 2016, the random-effect regression model results revealed that liquidity, bank size and inflation have positive and statistically significant impacts on dividend payout decision. But, the regression results suggest that bank’s growth and investment opportunity have negative and statistically significant impact on dividend payout decision in Ethiopian private banks.

Intellectual Capital and its Effect on the Financial Performance of Ethiopian Private Commercial Banks

Intellectual Capital and its Effect on the Financial Performance of Ethiopian Private Commercial Banks

Effect of Bank Specific And Macroeconomic Determinants on Capital Adequacy Ratio A Study on Ethiopian Private Commercial Banks

Capital adequacy implies the conventional assessment of the minimal level of capital, according to certain parameters, which reflect the dimension of banking activity and of related risks, capable to provide a correlation between the supposed obtained benefits and potential loss caused by a certain risk level. Since Capital adequacy ratio (CAR) is the ratio that is set by the regulatory authority in the banking sector, and this ratio can be used to test the health of the banking system. Thus, this study examines the effect of bank specific (Bank Size ,Deposit to Asset Ratio, Loan to Asset Ratio, Loan to Deposit Ratio, Return on Asset, Return on Equity ,Loan Loss Provision) and macroeconomic determinants (Gross Domestic Product and Inflation) on capital adequacy ratio of Ethiopian Private Commercial Banks. In order to investigate these issues a quantitative method research approach is utilized, by using documentary analysis. More specifically, the study uses five years (2016 – 2020) data for fourteen private commercial banks in Ethiopia. The study used multiple linear regression models to determine the relative importance of each independent variable using OLS to estimate the relationship between CAR its determinants by STATA 13 econometric software. The findings show that bank size, return on equity ,loan to asset ratio affect capital adequacy ratio negatively whereas return on asset ,loan loss provision affect capital adequacy ratio positively .Hence , it is recommended that to be sure that to be sure that bank have adequate adequacy reserve ,commercial bank and national bank of Ethiopia should give attention to the risk associated with bank size ,caring bank loan and deposit initiating to increase their return on their return on their asset and to manage their equity return. Keywords: Capital adequacy ratio, Ethiopian Private Commercial Banks, Panel data analysis DOI: 10.7176/RJFA/11-21-01 Publication date: November 30 th 2020

Does bank regulatory requirements affect risk‐taking behaviour of private banks in Ethiopia?

AbstractThis study examines the effect of monetary policy instruments on bank risk‐taking behaviour of private commercial banks in Ethiopia. Using Panel Dynamic OLS estimator, the empirical results suggested that private banks would take more risks in response to lower regulatory capital ratio, lower reserve requirements, the expansion of domestic credit, and large real asset size in the long run. In addition, the dynamic causal interactions showed that bank risk‐taking Granger causes only bank size in the system, but both capital adequacy and liquidity ratio Granger causes bank risk‐taking and bank size. With estimation results of generalized impulse function, bank risk have generally have a positive shock in response to regulatory capital ratio while a negative shock in response to liquidity for the first two periods. The variance decomposition results also suggested that all variables are relatively exogenous, and the forecast error for all variables is largely explained by their own innovations.

The Determinants of Capital structure in Ethiopian Private Commercial Banks: A Panel Data Approach

A wrong capital structure decision causes business frailer. However, still, what determinants optimal capital structure decision of companies remain the puzzles of many research scholars. This study is, therefore, aimed to investigate the determinants of the capital structure decision of private commercial banks in Ethiopia. The secondary data were obtained from audited annual financial reports of ten private commercial banks and the National Bank of Ethiopia covering the period of 2010-2018. The panel data were analyzed with a clustered robust random effect regression model. The study reveals that there is a significant positive relationship between earning volatility, size of banks, and taxation with leverage while profitability and asset tangibility are found to have a significant negative effect on the banks' leverage decision. The empirical findings of the study imply that the two capital structure theories, static trade-off and pecking order, are essentially explaining the capital structure decision of Ethiopian private commercial banks. Private commercial banks in Ethiopia should pay due attention to the microeconomic variables without overlooking the macroeconomic condition while articulating their optimal capital mix which can minimize the weighted average cost of capital and enhance the value of the company.

Macroeconomic and Firm-Specific Determinants of Banks Risk Liquidity: Empirical Inquiry from Ethiopian Private Commercial Banks

Macroeconomic and Firm-Specific Determinants of Banks Risk Liquidity: Empirical Inquiry from Ethiopian Private Commercial Banks

The Effect of Asset- Liability Management on Profitability of Private Commercial Banks in Ethiopia

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

Determinates of Capital Structure in Case of Private Commercial Banks in Ethiopia

This study was conducted on the title determinants of capital structure; evidence from private commercial banks in Ethiopia. To find out what determines capital structure, seven bank specific explanatory variables (Profitability, tangibility, growth, age, tax shield, size and liquidity) was selected and regressed beside the suitable capital structure measure (Debt to Equity Ratio). Fourteen private commercial banks, which had minimum of seven years life were selected for the study. Their audited financial statement from 2013 to 2019 was used as major source of data. Before the analysis of regression model test of CLRM assumptions such as normality, multicollinearity, heteroscedastcity and autocorrelation tests were conducted on the data. After these tests, Hauseman model specification test conducted and its result indicated that Fixed Effect Model was better to test hypotheses that emerge through the review of existing literature. Then inferential statistics regression was done by Fixed Effect Model (FEM). The regression result reveled that profitability, age, tax shield and size had significant effect on leverage. However, among the hypothesized capital structure determinants growth, asset tangibility and liquidity had insignificant effect on capital structure of Ethiopian private commercial bank. In addition, trade-off theory and the pecking order theory explained the capital structure behavior of banking industry in Ethiopia.

Comparing Financial Performance of State Owned Commercial Bank with Privately Owned Commercial Banks in Ethiopia

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.