OWNERSHIP AND ORGANIZATIONAL PERFORMANCE: A COMPARATIVE ANALYSIS OF PRIVATE AND STATE

Abstract

Ethiopia’s banking industry has experienced major structural transformations over the past decades; some of the key transformations include establishment of new banks, privatization of state-owned banks, domestic mergers and acquisitions (M&A). These changes have substantially altered the governance of banking organizations operating in Ethiopia. On the Study the performance of Banks were studied under their respective ownership category. The study highlight the role of ownership on the Ethiopian Banking sector and examines data and evaluates the performance of Banks in Ethiopia by categorizing them in to Private ownership and State ownership. It also examines the mode of ownership results in a higher performance rate. The core objective of the research is to spot the effects of ownership on performance of privately and state owned banks in Ethiopia and for this purpose Private and State owned Banks are selected based on their operation life in the banking sector. The study used available secondary data from published balance sheets and income statements from 2005 to 2010. Practically evidences are showing that state owned banks are better in performance than privately owned banks, out of all ratios, only four ratios (DER, ROA, and AU & EM) proved that private ownership is greater. However, the playing ground which private and state owned banks are competing is not fair, for example, the NBE-Bill is valid only to private banks, and any public offices and sectors are forced to work with CBE and also resources for condominium housing is mobilized only by the public owned CBE, so, this unequal treatment of private and state owned banks negatively affected private banks. Thus, the regulatory body of the banking system must revise directives issued on privately owned banks to encourage their participation and to motivate private banks to strive for more growth in the banking sector.