DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA
The healthiness of the banks is critical because they are highly fragile, vulnerable and closely integrated with other sectors. One way of testing the healthiness of the banks is through the measure of their profitability. Profitability is the primary objective of any business including commercial b...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Nicolaus Copernicus University in Toruń
2020-06-01
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| Series: | Copernican Journal of Finance & Accounting |
| Subjects: | |
| Online Access: | https://apcz.umk.pl/CJFA/article/view/30371 |
| _version_ | 1827853120687833088 |
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| author | Muktar Abdela Shifa Kenenisa Lemmi Debela Endalew Gutu Tarfa |
| author_facet | Muktar Abdela Shifa Kenenisa Lemmi Debela Endalew Gutu Tarfa |
| author_sort | Muktar Abdela Shifa |
| collection | DOAJ |
| description | The healthiness of the banks is critical because they are highly fragile, vulnerable and closely integrated with other sectors. One way of testing the healthiness of the banks is through the measure of their profitability. Profitability is the primary objective of any business including commercial banks. Profitable banks can withstand any negative shocks and stabilize the whole financial sector. The main objective of this study was to analyze the determinants of the profitability of commercial banks in Ethiopia. To achieve this objective a secondary source balanced panel data of ten years from nine commercial banks were used, and internal determinants; business mix indicators, risk aversion index, management efficiency, liquidity risk, bank size, and external determinants; ownership, market concentration, and GDP, were regressed against return on asset by using the pooled OLS technique. Results indicated that internal determinants were more important than external factors. Thus business mix indicators, risk aversion index, management efficiency, liquidity risk and bank size had a significant effect on the return on asset, whereas except ownership other external determinants, i.e. market concentration and GDP were insignificant to determine return on assets of Ethiopian commercial banks. Finally bank managers were recommended to rely on the debt financing sources paying a due attention to the optimal levels, mobilize more deposits, extend loan provision and expand business mixes services. |
| first_indexed | 2024-03-12T11:01:46Z |
| format | Article |
| id | doaj.art-bd6c22aaa80e4571b25f39c88a80114c |
| institution | Directory Open Access Journal |
| issn | 2300-1240 2300-3065 |
| language | English |
| last_indexed | 2024-03-12T11:01:46Z |
| publishDate | 2020-06-01 |
| publisher | Nicolaus Copernicus University in Toruń |
| record_format | Article |
| series | Copernican Journal of Finance & Accounting |
| spelling | doaj.art-bd6c22aaa80e4571b25f39c88a80114c2023-09-02T05:33:01ZengNicolaus Copernicus University in ToruńCopernican Journal of Finance & Accounting2300-12402300-30652020-06-0184DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIAMuktar Abdela Shifa0Kenenisa Lemmi Debela1Endalew Gutu Tarfa2Ethiopian Telecommunication CorporationJimma UniversityJimma UniversityThe healthiness of the banks is critical because they are highly fragile, vulnerable and closely integrated with other sectors. One way of testing the healthiness of the banks is through the measure of their profitability. Profitability is the primary objective of any business including commercial banks. Profitable banks can withstand any negative shocks and stabilize the whole financial sector. The main objective of this study was to analyze the determinants of the profitability of commercial banks in Ethiopia. To achieve this objective a secondary source balanced panel data of ten years from nine commercial banks were used, and internal determinants; business mix indicators, risk aversion index, management efficiency, liquidity risk, bank size, and external determinants; ownership, market concentration, and GDP, were regressed against return on asset by using the pooled OLS technique. Results indicated that internal determinants were more important than external factors. Thus business mix indicators, risk aversion index, management efficiency, liquidity risk and bank size had a significant effect on the return on asset, whereas except ownership other external determinants, i.e. market concentration and GDP were insignificant to determine return on assets of Ethiopian commercial banks. Finally bank managers were recommended to rely on the debt financing sources paying a due attention to the optimal levels, mobilize more deposits, extend loan provision and expand business mixes services.https://apcz.umk.pl/CJFA/article/view/30371healthprofitabilitydeterminantscommercial bankspooled OLSEthiopia |
| spellingShingle | Muktar Abdela Shifa Kenenisa Lemmi Debela Endalew Gutu Tarfa DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA Copernican Journal of Finance & Accounting health profitability determinants commercial banks pooled OLS Ethiopia |
| title | DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA |
| title_full | DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA |
| title_fullStr | DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA |
| title_full_unstemmed | DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA |
| title_short | DETERMINANTS OF THE PROFITABILITY OF COMMERCIAL BANKS IN ETHIOPIA |
| title_sort | determinants of the profitability of commercial banks in ethiopia |
| topic | health profitability determinants commercial banks pooled OLS Ethiopia |
| url | https://apcz.umk.pl/CJFA/article/view/30371 |
| work_keys_str_mv | AT muktarabdelashifa determinantsoftheprofitabilityofcommercialbanksinethiopia AT kenenisalemmidebela determinantsoftheprofitabilityofcommercialbanksinethiopia AT endalewgututarfa determinantsoftheprofitabilityofcommercialbanksinethiopia |