| Abstract: | Factors Impacting Profitability of Private Commercial Banks in Ethiopia
Tulu Deressa
Indira Gandhi National Open University, 2016
Banking sector is the backbone of any economy and plays an important role
in the economic development of a country. Mobilization of the national
savings to the productive sectors is possible only with the help of commercial
banks that augments the economic growth rate of a country.
This study investigates the effect of bank specific and macroeconomic
factors on banks’ profitability on profitability of private commercial banks in
Ethiopia. The determinants of banks’ profitability used in this study were
bank size, capital adequacy, assets quality, expenses management and
liquidity management as bank specific factors and NBE Bill, GDP, Inflation
rate and real interest rate as macroeconomic factors. The econometric model
of fixed effects regression method was used in this study, using a panel
data of 6 banks in Ethiopia for period from 2006 to 2015.
Overall, results of this study show that, the profitability of the private
commercial banks under study is mostly affected by bank specific factors
(that are internal factors determined by bank’s management decisions and
policy objectives). Yet, macroeconomic factors with the exception of NBE Bill
do not seem to significantly affect profitability. These results have important
implications for banks’ survival and growth. It is expected that this study
will guide the policy makers and bank management in the formulation and
implementation of better policies and strategies which may results better
performance of banks in Ethiopia. |
