Accounting and Finance Dissertation

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http://etd.aau.edu.et/handle/123456789/114

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Assessment of Internal Control Effectiveness in Selected Ethiopian Public Universities
(Addis Ababa University, 2015-01) Lemi, Tsedal; Abehodie, Wollela (PhD)
Internal control is the priority to detect assets misuse, ensuring efficiency of operations and adherence to rules and regulation. Governments need an assurance whether the internal control in their institutions is attaining these objectives. Audit reports of OFAG in recent years showed unfavorable audit findings on usage of budgets and compliance to rules and regulations in most public universities. Thus this study focused on assessment of the effectiveness of the internal control system in the universities to identify the possible areas of deficiencies in the system. The study used cross sectional survey through questionnaires to employees of the universities and semi structured interview with OFAG directors. Data were analyzed using descriptive statistics and inferential statistics using SPSS results. The result indicates that internal control in the universities is not effective. Particularly the risk assessment component of internal control is not practiced in the universities. Though monitoring is better in the universities, there is in adequate control environment, control activities and inadequate flow of information and communication in those universities. Hence, it needs commitment from both universities management and responsible government authorities to improve those specific areas of deficiencies’ in internal control indicated in the final chapter of this study
Assignment of VAT Revenue and Decentralization of its Administration: The Case of Ethiopia
(Addis Ababa University, 2009-06) Emiru, Alazar; Abehodie, Wollela (PhD)
This project tries to look at decentralization of VAT revenue and administration to sub national governments in Ethiopia in light of the international practices. It used individual in-depth interview to collect primary data from Ethiopian revenue and custom Authority (ERCA), Addis Ababa regional city administration tax office and ministry of finance and economic development (MOFED). The methods used for analysis were both qualitative and quantitative. The project discusses the problems in connection with decentralization of VAT administration and assignment of VAT revenue. The project suggests that decentralization of VAT administration needs capable and autonomous regional government and strong central government that could monitor and evaluate decentralization; and the assignment of VAT revenue also needs the central governments’ follow up to minimize the distortions and should be applied in consistent with the constitution
Audit Fees Determinants and Audit Quality in Ethiopian Commercial Banks
(Addis Ababa University, 2014-05) Afesha, Tamrat; Abehodie, Wollela (PhD)
The audit profession has been highly scrutinized among researchers and regulators following the fall of giant companies in the West. One of the issues that gained momentum has been to analyze the audit fee structure and the various auditor-client relationships. This study investigates the determinants of audit fees based on variables that are unique to the banking firms and considered important by regulators in a sample of Ethiopian commercial banks. The study also examined whether auditors take in to account factors considered important by the regulatory bank which result in better alignment of both the interests of auditors and the regulatory bank. Furthermore, the study investigates whether abnormally higher audit fees reduce the audit quality. The study used a panel data for eight commercial banks form the year 2004-2012. The panel fixed effect regression result revealed that bank size, liquidity, efficiency, loan growth, capital adequacy and auditor size are the main determinants of audit fees for the Ethiopian commercial banks. With regard to the factors considered important by the regulatory bank, auditors do not seem to consider credit risk in the determination of audit fees. In relation to the audit quality, the study failed to find any significant relationship between the extent of earning management through Loan Loss Provision and abnormal audit fees. This leads to conclude that auditors do not seem to compromise audit quality for the sake of securing abnormally higher audit fees. The researcher recommends auditors to further align their audit fee valuation with the interests of the regulatory bank particularly in respect of credit risk. Key words: audit fees, regulatory risks, audit quality, earning management, Loan Loss Provision
Business Taxpayers’ Satisfaction with the Tax System in Addis Ababa, Ethiopia
(Addis Ababa University, 2014-04) Debere, Temtime; Abehodie, Wollela (PhD)
This thesis examines business taxpayers’ satisfaction with the tax system. The study focuses on examining the views of taxpayers toward the tax taxpayers’ services, tax policy, tax administrative mechanism, and tax law enforcement. The study adopted a sequential explanatory mixed method research approach The data was collected from federal business taxpayers through questionnaire and in-depth interview and descriptive. The collected was analyzed using descriptive data analysis. The findings of this study shows that business taxpayers are not satisfied with the existing tax systems. The ways tax authority provides tax information to taxpayers, tax collection and tax refund, administration capability to solving taxpayers’ problem and the area of tax audit procedures are found to be the major dissatisfied areas. Moreover the finding revealed that the tax system is so complex and unfair, discretionary treatment by officers and existent of lack of monitoring in the tax authority. Finally, the thesis suggests a series of measures which could be taken by the government in general and tax authorities in particular are; improving tax policy and administration issues; step up their duty of promoting tax awareness, tax officers should be given intensive and repetitive training to improve their attitude and promoting code of conduct with emphasis on ethical values and finally, tax refund procedure would be improved
Customs Valuation System in Ethiopia
(Addis Ababa University, 2009-06) Seifu, Tenkir; Abehodie, Wollela (PhD)
The study assessed the customs valuation system applied in Ethiopia and investigated the existing problems in the system. The methods adopted in the study include documentary analysis, in-depth interview and self administered questionnaires. The results suggested that the Customs Valuation System in Ethiopia does not provide fair, neutral and uniform valuation and does not effectively protect traders from risk of arbitrary valuation by the customs officers. There is also risk of revenue loss to the government due to underinvoicing of imports by the traders since controlling mechanisms such as Post Clearance Audit (PCA) are not adequately developed. Therefore, the Government of Ethiopia needs to strengthen the controlling mechanisms within the customs valuation system since duties and taxes on foreign trade contribute the significant portion of its tax and duty revenues
Determinants of Capital Structure of Commercial Banks in Ethiopia
(Addis Ababa University, 2012-06) Shibru, Weldemikael; Abehodie, Wollela (PhD)
Determining the optimal capital structure is one of the most fundamental policy decisions faced by financial managers. Since optimal debt ratio influences firm’s value, different firms determine capital structures at different levels to maximize the value of their firms. Thus, this study examines the relationship between leverage and firm specific (profitability, tangibility, growth, risk, size and liquidity) determinants of capital structure decision, and the theories of capital structure that can explain the capital structure of banks in Ethiopia. In order to investigate these issues a mixed method research approach is utilized, by combining documentary analysis and in-depth interviews. More specifically, the study uses twelve years (2000 - 2011) data for eight banks in Ethiopia. The findings show that profitability, size, tangibility and liquidity of the banks are important determinants of capital structure of banks in Ethiopia. However, growth and risk of banks are found to have no statistically significant impact on the capital structure of banks in Ethiopia. In addition, the results of the analysis indicate that pecking order theory is pertinent theory in Ethiopian banking industry, whereas there are little evidence to support static trade-off theory and the agency cost theory. Therefore, banks should give consideration to profitability, size, liquidity and tangibility when they determine their optimum capital structure
Determinants of Dividend Policy of Insurance Companies in Ethiopia
(Addis Ababa University, 2012-06) Nuredin, Muhammed; Abehodie, Wollela (PhD)
This study seeks to find the determinants of dividend policy of insurance companies in Ethiopia. In order to achieve this objective, the study uses mixed research approach. Panel data covering nine-year period from 2003 – 2011 are analyzed for nine insurance companies. Also in-depth interview is conducted with company officials. The study analyses a range of determinants of dividend policy: Profitability, growth, Liquidity, Size and Leverage of the firm. The random effects technique has been applied to find out the most significant variables used by the insurance companies in making the dividend decisions. The results show that dividend decisions are relevant and profitability and liquidity are the statistically significant factors which positively influence dividend policy of insurance companies in Ethiopia. On the other hand, growth influences dividend policy negatively and significantly. Contrary to theoretical prediction, the study finds that size and leverage are insignificant in influencing the dividend policy of insurance companies in Ethiopia. The study provides evidence that profitability, liquidity and growth are the most important factors that affect dividend policy of insurance companies in Ethiopia. So, Ethiopian insurance companies’ managers should give consideration to profitability, liquidity and growth when they set dividend policy
Determinants of Non-performing Loans: Empirical Study on Ethiopian Commercial Banks
(Addis Ababa University, 2013-05) Tsige, Zelalem; Abehodie, Wollela (PhD)
This study examines the bank-specific and macro-economic determinants of Non- performing loans (NPLs) of commercial banks in Ethiopia. The study adopts a mixed methods research approach by combining documentary analysis (structured review of documents) and in-depth interviews. More specifically, the study reviews the financial records of eight commercial banks in Ethiopia and relevant data on macroeconomic factors considered for the period from the year 2000 to 2011. The findings of the study show that, loan growth, financial performance, operational efficiency, effective exchange rate, inflation rate and gross domestic product have negative and statistically significant relationship with banks’ NPLs. On the other hand, variables like bank size and state ownership have a positive and statistically significant relationship with banks’ NPLs. However, the relationship for average lending rate and income diversification were found to be statistically insignificant. The study suggests that focusing and reengineering the banks alongside the key drivers of NPLs could reduce the probability of loan default in Ethiopian commercial banks
Determinants of Non-Performing Loans: Evidence from Commercial Banks in Ethiopia
(Addis Ababa University, 2017-06) Asfawesen, Mekdes; Abehodie, Wollela (PhD)
This study examined the bank-specific and macro-economic determinants of Non-performing loans (NPLs) of Ethiopian commercial banks. The study adopted a quantitative research approach. The study uses data collected from the National Bank of Ethiopia, Central Statistical Agency and financial statement of nine commercial banks. Data covers the period from 2006-2016. Descriptive and multiple regression analysis employed to analyze the unbalanced panel data. Findings of the study show that return on equity and capital adequacy have negative and significant impact on NPLs. Whereas, loan loss provision and loan to deposit have positive significant relationship with NPLs. The finding of this study is important since once identifying the determinants of NPLs might enable management body to make appropriate lending policies that prevent the occurrence of NPLs. The study recommended as bank managers better emphasize the management of current assets specially loans. Furthermore, preferable for commercial banks to concentrate or diversify their credit portfolio by calculating risk relative to its return in order to increase return on equity and to reduce the level of nonperforming loans. Also the study suggest for future researcher to validate the consistency of the result and provide additional results by including other variables like priority sector loan, monitory policy and sensitive sector’s loan. Key words: Nonperforming loans, bank specific factors, macroeconomic factors
Environmental Taxation Practice and Revenue Performance in Ethiopia
(Addis Ababa University, 2013-06) Melese, Lalu; Abehodie, Wollela (PhD)
The study focuses on investigating the environmental taxation practices and their revenue performance in Ethiopia. It adopts a mixed methods research approach to address the broad objective through answering research questions and specifically, it uses quantitative (surveys of structured review of documents), in-depth interview together with documentary analysis. The study statistically analyzes the data elicited from documents. It also supports the result from survey by the results from in-depth interviews and document studies. The results of this study reveal that there is no explicit environmental tax in Ethiopia but there exist environmental tax bases which categorise these taxes as environmental tax. The result also identifies that these tax has revenue contribution for the country also it identifies the percentage of these taxes to the total revenue as well as tax revenue is high. And that there are various activities in Ethiopia in which this taxes could be introduced. Moreover, the result identifies the tax can be used as a source of fund for environmentally beneficiary projects. As a whole, the study suggests that laws need further guiding principle and manuals; strict implementation of prior laws like environmental impact assessment is needed also a series of measures which could be taken by the government policy makers and regulators
Evaluation of Financial and Operating Performance of Floriculture Firms in Ethiopia
(Addis Ababa University, 2009-06) Arefaynie, Girum; Abehodie, Wollela (PhD)
This project tries to look at the financial and operating performance of floriculture firms in Ethiopia. Further, it assesses the current export performance of the industry. In order to address the above broad objective, secondary data in the form of business reports, and financial statements were collected.Moreover, primary data using unstructured interviews were collected from the floriculture firms and Ethiopian horticulture producers and exporters association to support the secoundary data analysis.With the aforesaid data, different types of ratios such as profitablity, capital structure ,and liqudity ratios had developed to evaluate the performance of the firms under consideration. According to the findings presented in chapter four, floriculture industry is showing a remarkable export performance for the last five years. However, the unit prices of stem show a decline from period to period. In the same token, selected flower firms had more ability of paying their debt in the year 2007 and 2008 than previous years. Finally, searching new market, creating awareness in domestic market, training for grower, exporters and retailers are among the recommendations given
Financial Risks and Profitability of Commercial Banks in Ethiopia
(Addis Ababa University, 2013-11) Lake, Eneyew; Abehodie, Wollela (PhD)
Commercial banks assume various kinds of financial risks which are related to the financial operation of a business and arise due to the uncertainty in movement of foreign exchange rates, interest rates, credit quality, and liquidity position. Risk may have positive or negative outcomes or may simply result in uncertainty. Therefore in order to increase the return, banks should know which risk factors have greater effect on profitability. Thus, this study examines the impact of financial risks on the profitability of commercial banks for a total of eight commercial banks in Ethiopia, covering the period of 2000-2011. To this end, the study adopts a mixed methods research approach by combining documentary analysis and in-depth interviews. The study reviews the financial records of eight commercial banks in Ethiopia and relevant data on macroeconomic factors considered. The findings of the study show that Credit risk and liquidity risk have a negative and statistically significant relationship with banks’ profitability. However, the relationship for interest rate risk and foreign exchange rate risk is found to be statistically insignificant. The study suggests that focusing in credit risk management and keeping optimal level of liquidity which enables banks to meet their contractual commitments could maximize return on assets of Ethiopian commercial banks
The Impacts of Working Capital Management of Firms Profitability
(Addis Ababa University, 2011-06) Mekonnen, Mulualem; Abehodie, Wollela (PhD)
The purpose of this study is to investigate the impact of working capital management on firms’ profitability. The study aims to examine the statistical significance between firms’ working capital management and profitability. In light of this objective the study adopted quantitative method of research approaches to test a series research hypothesis. Specifically, the study used survey of documentary analysis of companies’ audited financial statements. Stratified sampling design was employed based on nature and turnover of companies. Then companies were selected based on simple random sampling method from each stratum’s to avoid biases and represent firms from each sub- classification (stratum’s) within manufacturing companies. Consequently, the study selected a sample of thirteen (13) companies for the period of five years (2005-2009) with the total of 65 observations. Data was then analyzed on quantitative basis using Pearson’s correlation and OLS regression analysis. The results showed that there is statistical significance negative relationship between profitability and working capital management. It means that, companies managers can create profits or value for their companies and share holders by handling correctly the cash conversion cycle and keeping each different component of working capital to a possible optimum level. The researcher found that there is a significant negative relationship between liquidity and profitability. Moreover the study finds that there is strongly significance positive relationship between size and firm profitability. Unlike, the study found that there is no statistically significance negative relationship between debt used and firms profitability. Keywords: working capital, working capital management, firm size, cash conversion cycle and profitability
Perception Towards the Burden of Regulations on Small and Medium Enterprises in Gulele Sub-city: Addis Ababa
(Addis Ababa University, 2011-06) Kenubeh, Derbew; Abehodie, Wollela (PhD)
The study focuses on Perception towards the burden of regulations on small and medium enterprises in Gulele sub-city: Addis Ababa. The study adopts a mixed methods research approach to address the broad objective through answering research questions and testing the hypotheses developed from the literature review. Specifically, the study uses quantitative surveys of SMEs, in-depth interviews with a sample of SMEs owners, managers or employees. The study statistically analyzes the data elicited from surveys of SMEs. It also supports the result from survey questionnaire by triangulating the results with in-depth interviews and document studies The result of this mixed approach methodology explores that SMEs face challenges from different factors but, they perceived challenges from regulatory burden outweigh other factors. The result also identifies mechanisms mostly used by SMEs to mitigate problems from regulations and how much the regulators have smooth contact with them and to what extent the regulators made inspection, consultation and communication. Moreover, the result identifies the relation between regulations and SMEs performance and growth based on their view i.e. they have positively related each other. As a whole, the study suggests a series of measures which could be taken by the government policy makers/regulators and for SMEs. This measure includes to adopt government impact assessment task force and review the existing regulations how much they enable and constrain businesses and at the same manner suggest for SMEs to incorporate different mechanisms to comply with regulation rather than rely more on specific mechanisms
Perception Towards the Role of Higher Accounting and Finance Education in Meeting Industry Needs. the Case of Some Selected Institutions in Ethiopia
(Addis Ababa University, 2015-06) Teferi, Erko; Abehodie, Wollela (PhD)
This study examines perceptions of accounting and finance graduates whether accounting and finance graduates education sufficiently prepared them with various skills to meet the needs of the industry. Besides, the study examines employers’ perception whether graduates skills meet the needs of industry. The study adopts mixed method approach in order to achieve the research objectives. Specifically, the techniques used in the study include survey with graduates and employers as well as in-depths interviews with graduates and employers. The results of the study showed that skills such as team work skill, interpersonal skills, computer skills, problem solving skills and communication skills are rated as most important for career success in accounting and finance jobs. However, graduates claimed that they were not equipped with skills such as computer skills, writing skills. Employers were also dissatisfied with graduates’ skills like written communication skills (report writing and typing) and computer skills. Finally, the study forwards possible measures to be taken by universities and colleges to improve graduates’ skills in order to fit with the needs of the industry
Public Procurement Practices and Challenges in Ethiopia: Evidence from Selected Public Organizations
(Addis Ababa University, 2017-06) Legesse, Roman; Abehodie, Wollela (PhD)
The objective of this study is to assess the regulatory framework, practices and challenges of public procurement in selected public organizations in Ethiopia, and to see the main procurement procedures in light of public procurement practices in some East African countries. The study used mixed research approaches: Survey, in-depth interviews and documentary analysis. The main findings include: some public procurement performances regarding need identification, selection of procurement methods and planning processes were not in accordance with the procurement rules and regulations, and lack of effective use of procurement budget. As the study reviled the causes for the problems were: failure to retain skilled manpower due to low government salary scale; only one agency (the procurement agency) is mandated to process all public procurement in all public organizations; and lack of transparency in the contract administration procedure. Moreover, the result shows that the main procurement procedures in the three East Africa countries are similar to that of Ethiopia in many aspects. However, some of the observed gaps should be filled. This needs commitment from responsible government authorities to improve the public procurement practices and resolve challenges for sound public procurement practices. Key Words: Public procurement, procurement procedures, procurement planning, procurement specifications
Role of Financial Institutions in the Growth of Small and Medium Enterprises in Addis Ababa
(Addis Ababa University, 2012-02) Workie, Dereje; Abehodie, Wollela (PhD)
This thesis examines the role of financial institutions, banks and microfinance institutions, in the growth of small and medium enterprises (SMEs). The study focuses on examining the contribution of financial institutions, assessing the accessibility and affordability of products and services, and identifying ways of addressing the problems in accessing and settling loans. The study adopts a mixed research approach to test the hypothesis and answer research questions. Specifically, the study uses survey of SMEs, documentary analysis (documents held by SMEs), and in-depth interviews with banks managers/officials. The study statistically analyses the results of survey and documentary analysis while descriptive research approach was employed for in-depth interviews. Results show that financial institutions were contributing to SMEs growth. Consequently, the relationship between loans from financial institutions and SMEs growth are positive and statistically significant. However, the extents of contribution were very low. Further, it identifies ways of addressing the problems that SMEs face in accessing and settling loans include: flexing terms and conditions, using alternative collateral and credit facilities, refinancing, and postponing maturity period. Finally, the thesis recommends a serious of measures which should be performed by the government and by financial institutions. These include: creation of a level playing field, lowering transactional costs, and commercial banks should reappraise their role. Key words: role, financial institutions, SMEs growth

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