The Effect of Technological Innovation on the Financial Performance of Commercial Banks in Ethiopia

Abstract

Now a day technological innovation recognized as essential element of firm’s competitive strategy and enhancement of its financial and operating performance. In fact, firms that employed innovation to enhance their operations or distinguish from rivals in goods and services performance relatively demonstrated better economic and financial status. The main objective of this study was assessing the technological innovation has any effect on financial performance of Ethiopian commercial banks. For this study, secondary data was collected from annual published report of the banks. Hence, EViews 8 software was employed to analyze the data. To see the association among technological innovation and financial performance, an econometric regression model applied over a decade (2014 – 2023 G.C.). Financial performance which is dependent variable is measured by Return on Asset (ROA). While independent variables identified as technological innovation measured by, ATMs, debit cards, internet banking, mobile baking POS terminals, Investment in computer software and bank size. Finally, this study explores how Ethiopian banks can leverage technology for profit. Mobile banking and POS terminals are clear winners, but debit cards, internet banking, and software require further optimization. For larger banks, balancing growth with efficient operations is key. By strategically adopting and refining technologies, Ethiopian banks can thrive in the digital age.