DETERMINANTS OF BANK LIQUIDITY: EMPIRICAL STUDY ON SELECTED PRIVATE ETHIOPIAN COMMERCIAL BANKS

Abstract

Optimal liquidity maintenance is important objective of banks solvency, hence this study identifies the determinants of liquidity on selected Ethiopian commercial banks, in order to achieve the research objective the study applies fixed effect panel regression for six commercial banks as a sample covering the period from 2000 to 2017 by applying non-probability sampling method type which is purposive sampling. The study also used explanatory research design and quantitative research approach by gathering important data’s from secondary source referencing to documents available within the financial statements of the banks. The findings of the study implies that among the five factors affecting banks liquidity Market share,investement in domestic banks has positive and statistically significant impact on banks liquidity where as Non performing loan has negative but significant impact on banks liquidity. GDP growth rate and unemployment rate had statistically insignificant impact on banks liquidity.