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Title: The impact of NBE bills purchase on the profitability of private commercial banks: An Empirical Study on Ethiopian Private Commercial
???metadata.dc.contributor.*???: Asmare Emerie (Dr.)
Memru, Tesfaye
Keywords: NBE;Ethiopian Private Commercial
Issue Date: Dec-2016
Publisher: A.A.U
Abstract: The purpose of this study is to investigate the impact of NBE bills purchase on the profitability of private commercial banks in Ethiopia by using panel data of sixteen private commercial banks with a total of 64 observations from year 2011 to2014. The study used quantitative research approach and secondary financial data are analyzed by using multiple linear regression models for the three bank profitability measures; Return on Asset (ROA), Return on Equity (ROE), and Net Interest Margin (NIM). Regression model was applied to investigate the impact of Capital adequacy, NBE bills, liquidly & total loans to total asset. Growth rate on major bank profitability measures (i.e., (ROA), (ROE), and (NIM) separately). The study finds that exposure to government bill has moderate effect on banks profitability in the past years. However if the policy persist without amendment or phase out it will definitely create a significant negative impact on banks performance. On the other hand the bills seems contributed positively to perform via mopping up the excess liquidity holding of banks or to invest excess funds in earning government securities than the customary practices of holding liquid asset in zero earning account at the NBE. In addition, it instigated banks to some extent provide focus on other fee generating sources. The significant relation of the NIM with performance revealed that banks respond to the policy through adjusting their loan price in a way to compensate for the opportunity they lost. Consequently the banks cost related to bill purchase to some extent seems to be covered by borrowers but the increase in the rate of interest has not resulted in materialized high default risk. In general, the result of the study shows the effect of the policy measure is mitigated by the excess liquidity standing of banks during the policy formulation, the likely possibility to expand to other fee generating services, stable liability price and banks discretion to adjust their asset price. Nevertheless, the decline trend in the share of loans from the total asset could have negative effect on the long run which in fact to some extent will be moderated by the maturity of part (but significant sum) of the bills in few years time. The study focused on the historical impact of the bill measure: hence its long run effect requires further exploration.
Description: A Thesis Submitted to Department of Management College of Business and Economics Presented In Partial Fulfillment of the Requirements for the Degree of Executives Master of Business Administration (EMBA)
Appears in Collections:Thesis - Business Adminstration

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