Browsing by Author "Gebreyes Begna"

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    Determinants of Capital Structure of Commercial Banks in Ethiopia
    (Addis Ababa University, 2018-02) Gebreyes Begna; Habtamu Berhanu
    The main objective of this study is to analyze internal and external factors determining capital structure decisions of commercial banks in Ethiopia. To achieve the objective, the researcher used only secondary data obtained from the annual financial statements of selected commercial banks in Ethiopia and National Bank of Ethiopia (NBE). In this study, one dependent variable (leverage) and six independent variables, i.e. growth, size of the firm, tangibility of assets, liquidity, inflation and profitability were employed. Explanatory research design and purposive sampling method were employed in this study. The balanced panel data was analyzed by using descriptive, correlation and multiple regression analyses.. The findings show that profitability, size, tangibility of assets and growth of the banks are important determinants of capital structure of banks in Ethiopia. However, liquidity and inflation 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, growth and tangibility of assets when they determine their optimum capital structure.