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Abstract

This study examines the effect of advertisement on financial performance of private commercial banks in Ethiopia with the presence of control variables: Capital Adequacy, Management Efficiency, Earning Ability and liquidity, by using unbalanced panel data of sixteen private commercial banks operating in Ethiopia over the period 2003-2017. Moreover, ROA, ROE and NIM were used to measure the financial performance. This paper used fixed effect least square method to estimate the impact of bank specific factors and detailed descriptive statistics and regression analysis has been used to evaluate the relationships between the bank specific variables and financial performance metrics. Based on the regression result; advertisement, management efficiency and earning ability have a significant effect on the financial performance of Ethiopian private commercial banks. Furthermore, the outcome of the result shows that advertisement has positive and statistically significant effect on private banks performance measured by ROA, ROE and NIM. The other control variable which is management efficiency has negative and statistically significant effect on the three financial performance indicators. Earning ability has positive and significant effect on net interest margin and has negative and significant effect on return on equity model. Thus, management bodies of commercial bank should give emphasis on the identified significant factors.