DETERMINANTS OF COMMERCIAL BANKS’ PERFORMANCE: AN EMPIRICAL STUDY ON ETHIOPIAN PRIVATE COMMERCIAL BANKS

Abstract

This paper investigates the determinants of Ethiopian private commercial banks performance considering bank specific, industry specific and macroeconomic variables on six selected private commercial banks’ ranging from 2001 to 2017. The bank's Audited financial statement and National Bank of Ethiopia has been the main source for the study and the panel analysis has been carried out to obtain the result for this empirical study. The fixed effect regression technique was used to estimate the model using the econometric package E-Views 8.The study used ROA as Dependent variable and Managerial efficiency, Bank Size, Financial Leverage, Number of Branches, Liquidity, Banking sector Development, GDP and inflation as independent variables. The study finds that Managerial Efficiency, Bank size and GDP have positive and significantly affect bank Profitability. On the other hand Number of Branches, liquidity and financial leverage has significant and inverse relationship with Private Bank's performance. However the result shows insignificant relationship between performance of Ethiopian private commercial banks with Banking sector development and inflation.