Accounting and Auditing
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Item Benefits and Difficulties of Adopting Ipsas on Non-Governmental Organization in Ethiopia(A.A.U, 2022-11-08) Fikirte Shimelis; Temesgen Worku (PhD)The general topic of this study states that the benefit and difficulties of adopting IPSAS on NGO in Ethiopia. This study specifically observed on the problem of the statement that lack of awareness and knowledge for first identifying and understanding the benefit and difficulties of adopting IPSAS which makes difficult to run smoothly the process of adoption of IPSAS on NGO in Ethiopia. The objective of the study was to enhance the readiness and create awareness of NGO in Ethiopia for the smooth adoption of IPSAS. The researcher collected data from primary and secondary sources, using questionnaires, document review and interview. The researcher has employed close ended questionnaire to gather data, based on this 44 participants’ (Director, finance managers and finance officers) who understood IPSAS's objectives and were responsible for the adoption process. The selection was from Addis Ababa non-governmental organization and AABE by using purposive sampling. 33 of the population were responded and the researcher used a questionnaire based on likert scale to collect data. It was analyzed by use of tabulating, percent, mean, frequencies count and validity test by using SPSS version 20. This study has focused on identifying the benefits and difficulties of adopting IPSAS on eleven thematic areas namely transparency, accountability, comparability, decision-making, reliability, skill gap, implementation cost, and resistance, complex and comprehensiveness, technology and infrastructure. The findings of the study shows that, majority of respondents have strongly agreed on first identifying the benefit and difficulties of IPSAS and have awareness and readiness on them in order to speed up the adoption of IPSAS for NGO in Ethiopia.Item Effectives of Implementation of Audit Recommendations on the Selected Public Sector Universities(A.A.U, 2022-05-17) Redet Kebede; Abebe Yetayw (PhD)This research project assessed the effectiveness of implementation of audit recommendation on selected public sector universities. And 3 public sector universities were selected. Primary data were collected by using questioner. The questioner was prepared from many aspects. The result showed that there is poor implementation of audit recommendations and that causes risk on the selected public sector universities and commit to massive corruption and fraud. There for this project will benefits the top level managers to work hard and follow in depth through the ground on implementation of those audit recommendationsItem Assessment of the Causes of Non-Performing Loan at Development Bank of Ethiopia (DbE)(A.A.U, 2022-06-01) Lielt Ferede; Sewale Abate (PhD)The main objective of this research was Assessment of the Causes of Non-Performing Loan at Development Bank of Ethiopia (DBE), this study presented by explanatory research design, and used mixed research approach: qualitative and quantitative approach mainly used qualitative approach to analyze data. This study applied semi-structured interview with the DBE’s loan officer to collect the primary data and also used secondary data: reviewed the written materials, DBE’s manual, policy, the directives of National Bank of Ethiopia and also retrieved materials from internet. And also ratio of bad debt to operating income calculated. The major findings classified the causes of NPL into three categories: bank side, customer side and external. The bank side contains inadequate information, lack of follow-up and decision making and over patience. The customer side: lack of equity, loan diversion, willful defaulters and management problem. And external: inflation, foreign currency, government and marketing are the causes of NPL are beyond the bank and the customers’ capacity. These major causes of NPL have the negative effect on the bank’s performance. As per the NBE directive, DBE shall provision for all loan. This provision for loan declines 82.97% of total operating income of the bank, the difference of the loan and the value of collateral is the bank’s loss and the bank is exposed to pay unnecessary expenses due to taking over and managing the companies in NPL. According to these findings these recommendations have been presented: the bank has to apply decisions about the companies in NPL and before granting loan, the bank should implement special assessment to avoid at least to reduce NPL.Item Assessment on Credit Management Practices of Awash Bank S.C.(A.A.U., 2023-06-02) Lensa Sheleme; Abebaw Kassie (PhD)The banks act as an intermediary to mobilize the excess fund of surplus sectors to provide necessary finance, to those sectors, which are needed to promote for the sound development of the economy. The main purpose of this study is to assess credit management practices of Awash Bank S.C. The study was used descriptive research design. Both qualitative and quantitative research approach were employed to collect and analyze data. The study selected a sample size of 110 respondents using a stratified sampling method. Relevant data were collected from both primary and secondary sources. Questionnaires and interviews were used to gather primary data while secondary data was gathered from the Bank's annual reports from FY 2013 to 2022, as well as other relevant publications. The collected data was analyzed using descriptive statistics with the help of SPSS version 25. The study found that the bank is operating using a sound credit-granting process and that the duration of the granting process needs to be changed; credit administration teams are appropriately approving credit requests; the bank does not periodically visit all borrowers after credit granting; the bank’s total amount of loans and advances granted each year has continuously increased; the bank has developed its own internal credit customer risk rating system, but it does not apply to personal loan and project loan borrowers, loan requests under 5 million and the NPL ratio from FY 2013 to FY 2022 was less than 5% NBE threshold. The study recommended that the bank should automate credit granting process, develop a customer credit risk grading system for personal loans, projects loans, and also minimize NPL ratio to nearly zero levels.Item Effect of inflation on Loan Recovery in the Case of Nib International Bank(A.A.U, 2023-12-07) Betelhem Belayneh; Alem Hagos(PhD)Ethiopia has been going through a growing inflation rate for the past six years (2016/17-2021/22), and the impact of inflation has been felt throughout different economic sectors. One of Ethiopia's notable private banks is Nib International Bank and the primary goal of this research was to assess the impact of inflation on loan recovery in NIB. The study focuses mainly on the effects of inflation on the loan recovery performance of NIB. Descriptive research design and quantitative research approach were used. Loan repayment were the dependent variable under research, whereas inflation was the independent variable. To achieve the study aims and to test our hypotheses, SPSS version 25 was used to calculate descriptive, simple ratios, percentages, tables, mean frequencies, standard deviations, etc. as well as inferential statistics like stationary analyses, autocorrelation and regression analyses. Secondary data were used in the study to achieve its objective from the annual reports of the National Bank of Ethiopia (NBE) and Nib International Bank as well as the index data from the World Development Bank from 2016/17 to 2021/22 are collected in the form of CSV. Ethiopia experiences a high inflation rate from the years 2016/17 to 2021/22 and the highest inflation rate was recorded in 2021/22. The study shows that inflation rate and loan recovery performance have a negative proportional relationship therefore the finding show that independent variable has strongly correlated to loan repayments performance or practices the study reckoned that NIB should give a high priority and a keen eye on the effects of inflation and should have their own policies and strategies to mitigate the effects. Key word:Item Factors Affecting Liquidity of Commercial Banks: (Case Study on Selected Banks in Ethiopia)(A.A.U, 2023-08-08) Desibelewe Erkihune; Abebe Yitayew(PhD)The main objective of the study is to investigate the factors that affect Ethiopian commercial bank’s liquidity. The data covered the period from 2018-2022 G.C for the sample of selected ten commercial banks. Quantitative research approach and explanatory Research design were adopted in carrying out this research. Secondary data were collected from the selected ten commercial banks using purposive sampling technique. Macro- economic data are collected from NBE and World Bank report while internal factor data were collected from audited financial statements. The study used both descriptive and inferential statistics. Mean and standard deviation were used as descriptive statistics, whereas correlation and panel regressions were used from inferential statistics using stata. The findings of the study shows that bank size, gross domestic product, and national bank bill purchase have negative and statistically significant impact on liquidity and profitability has positive significant effect on commercial banks liquidity. Deposit growth, reserve requirement and asset management have positive and statistically insignificant impact on liquidity. In addition, Capital adequacy and operational efficiency have negative insignificant effect on bank liquidity. The study suggests that focusing and reengineering the banks alongside the key internal factors could enhance the liquidity position of the commercial banks in Ethiopia. Moreover, banks in Ethiopia should not only be concerned about internal structures and policies, but they must consider the macroeconomic environment together in developing strategies to improve the liquidity position of the banks. On the other side the policy maker, NBE has to consider the existing economic conditions and promote favorable environment to the development of the financial sector.Item The Effect of Budgetary Control System on Organizational Effectiveness: A Case Study in Some Selected Ethiopia Commercial Banks(A.A.U., 2022-06-04) Gizework Sintayehu Kassa; Tekalign Nega (PhD)The general objective of this study is to examine the impact of budgetary control system on organizational effectiveness of the banking sectors in Ethiopia. The methodology to carry out this study, the findings and recommendation are stated briefly as follows: the researcher used explanatory research method. And he used also quantitative research method for nature of data he would collect. Moreover, primary and secondary source of data were applied using structured questionnaires and periodical reports of the bank respectively for data analysis purpose. The Finance managers, supervisors and accountants in accounting and finance departments and auditing department, and Departmental managers, supervisors, other staffs in budget offices of 10 banks were the sampling frame of this study. Descriptive statistics and inferential statistics were be used for data analysis too. The findings of the study revealed that there is positive impact of budgetary control system on organizational Effectiveness, Assignment of the right person on the right position, Job Satisfaction, High performance working, efficient utilization of resources, Organizational competitiveness and operational Efficiency. Finally, the researcher comprehends this study reveals some sort of understanding on the relationship between budgetary control system and organizational effectiveness especially in Ethiopian commercial banks, so he recommends that all commercial banks in Ethiopia should strengthen their budgetary control system as it is the core mechanism to bring their banks effectiveness.Item Determinants of Financial Performance of Automotive Importing Firms in Ethiopia(A.A.U, 2023-06) Mastewal Bekele; Alem Hagos (PhD)This study was conducted to examine of Determinates of financial performance of automotive importers in Ethiopia. Based on this aim, the study has analyzed foreign exchange volatility, performance of the firms, and examine effect of the exchange rate volatility on sales and profitability of the firms. The study has followed descriptive and explanatory research designs and used quantitative research approach. This study used 20 firms that import automotive and they operate in Addis Ababa. The study has used secondary data collected from the firms and NBE. The data was analyzed by using descriptive statistics and regression. The exchange rate volatility was estimated based on ARCH methods and existence of ARCH effect was examined by using ARCH LM test. For the volatility estimation, the study has included 120 months; from 2013 to 2022 business calendar. In addition, the effect of estimated exchange rate volatility on performance of the firms was estimated by using panel models; fixed effect and random effect models. In addition, exchange rate volatility, the estimation model included Size, liquidity, leverage, market power and Economic Growth. This study has identified that exchange rate in Ethiopia is frequently and unpredictably changes from time to time. Moreover, it was identified that the exchange rate volatility has no ARCH effect and this indicated that exchange rate volatility in Ethiopia is not predictable based on its volatility in previous period. In addition, size, leverage and liquidity have positive and significant effect on both profitability and sales performance of the firms. In contrast, leverage has negative and significant effect on performance of the firms. Moreover, economic growth has positive and significant effect on performance of the firms.Item The Role of Microfinance in Financial Inclusion in Addis Ababa City(AAU, 0024-02-19) Meron Jemal; Alem Hagos (PhD)Determining the role of microfinance institutions in financial inclusion in Addis Ababa was the study's goal. Apart from utilizing simple random and purposeful sample techniques, the study employed both explanatory and descriptive research methodologies. The study's primary data were gathered through questionnaires and interviews. Secondary data was also gathered from desk reviews of selected microfinance institutions in Addis Ababa, and both descriptive and inferential statistics were utilized to analyze it. Out of the 384 survey questionnaires that were obtained from randomly selected microfinance institutions customers, only 312 were completely filled out, sent back, and utilized in the study. The Consultative Group to Assist the Poor produced the most extensively used performance metrics, which were used to evaluate the microfinance institutions' performances. The study's conclusions showed that the microfinance institutions in Addis Ababa had been in operation for more than eight years, were categorized as mature, and had a sizable gross loan portfolio that exceeded 50 million Ethiopian Birr—but a limited number of active borrowers. The study's regression analysis revealed that group lending, saving mobilization, and small business lending all had a positive and significant impact on financial inclusion. The majority of microfinance institutions in Addis Ababa offer group loans, it would be beneficial for them to keep up this practice in order to attract more clients and lower operating costs per borrower.Item Challenges of International Trade in Banking Operations in Ethiopia: The Case of Bole Lemi Industrial Park(AAU, 2023-09-15) Yoseph Mulatu; Takele Fufa (PhD)Banks in Ethiopia face challenges in their day-to-day operations. The challenges can be either of a market or operational nature, or regulatory or reform-related. This study examined the challenges faced by international companies in banking operations in Ethiopia in the case of Bole Lemi Industrial Park. The research adopted a descriptive study design, using mean and standard deviation as a statistical tool to analyze the collected data. Stratified random and purposive sampling were used to reach a predetermined number of employees and to identify interviewees within the departments of the selected companies. The survey achieved a response rate of 86% and was analyzed using Microsoft Excel. The results show that the effectiveness of banking operations is challenged by factors such as political influence, exchange rate volatility, ethical issues, corruption, technological barriers and regulatory compliance. However, the challenges posed by cultural differences were found to be minimal. On the other hand, international companies face strict NBE regulations and lengthy approval processes. Political influence, currency fluctuations and technological challenges were also identified as the most significant factors affecting banking operations. The study highlights those international companies operating in the industrial park face difficulties in banking operations due to the studied variables and the strict regulations and lengthy approval procedures of the NBE. This is an indication that businesses are experiencing difficulties and dissatisfaction with the banking sector. However, by addressing these issues, Ethiopian banks can increase the scope and quality of their services while improving operational efficiency. The study recommends that policymakers and the NBE improve banking regulations and that banks develop their capacity to improve banking operations. Researchers should also conduct further studies on improving banking operations.Item Assessing The Practice of Internal Auditing In the Case of Ethiopian Electric Utility (EEU)(AAU, 2024-02-02) Zehara Beshir; Abebaw Kassie (PhD)The objective of this study was to assess the internal audit practices in Ethiopian Electric Utility (EEU) head office and the four district offices in Addis Ababa. This study employed a descriptive design with mixed research approach. The primary data was collected from 41 respondents Ethiopian Electric Utility (EEU) head office and the four district offices in Addis Ababa. Then, descriptive statistics analysis was done through SPSS version 26. The results of the study showed that the practice regarding the performance of the internal audit work, internal audit charter and auditors’ level of proficiency and due professional care was high. The practice of internal audit independence and objectivity and scope of the internal audit work was moderate. However, the practice of EEU regarding management support for internal audit was poor. The results of the study also showed that the use of ERP system contributes for the good practice of internal auditing. Based on the findings of the study, it was recommended that the organization must prioritize and foster a culture that values objectivity and independence in internal audit through the establishment of clear policies, appropriate training, unrestricted rights of access to all information and records to support the internal audit function. The organization has to facilitate the internal audit works by allocating sufficient budget, recruiting more adequate and competent internal auditors and invest in the right technology that are easy to use, secure and compatible with existing systems to strengthen the internal audit practice.Item Determinants of Internal Audit Effectiveness in the Public Enterprise: the Case Study in Selected Ethiopian Public Enterprise Offices(A.A.U, 2022-07-18) Zenebech Begashaw; Abebe Yitayew (PhD)The main purpose of this study is to investigate on the determinants of internal audit effectiveness in the selected Ethiopian public enterprise offices. This investigation is focused on 10 purposely selected public enterprise offices that are expected to represent all other sectors. The management teams and the internal auditors of the selected public enterprise office are the source for the required data to the researcher through the questionnaires administered. In addition, the finding of this study is to show the direct relation effects of management perception, management support, organizational independence of internal auditors, adequate and competent internal auditor’s staff and the presence of approved internal audit charter with the internal audit effectiveness on the public sector management. According to the regression output the management support, the existence of adequate and competent IA staff, and the availability of approved IA charter were contributed for the internal audit effectiveness in the public enterprise significantly and positively. The remaining two variable; the managements perception for the IA value and the organizational independent of internal auditors were positively related with the IAE but their contribution for the IAE were statistically not significance. All of these five independent variables are making 55.10% of the contributions for internal audit effectiveness in the public enterprise offices. The public sector offices should understand that the contributions of these variables were collectively significant to identify any noncompliance activities in their office and to add values for the IAE in the public enterprise offices.Item The Effects of Foreign Currency Shortage on Performance of Ethiopian Brewery Companie (BGI Ethiopia PLC)(A.A.U., 2022-11-08) Keneni Asrat; Alem Hagos (PhD)Shortage of foreign currency is one of the characteristics of developing countries. Exchange rate changes affect the production level of industries through trade channel effects and variation of the prices of inputs and outputs. One of the major areas which is affected by shortage of foreign currency is the performance v of an organization. The aim was to explore the effect of foreign currency shortage on performance of Ethiopian Brewery companies. Mixed research design was implemented to explore the effect of foreign currency shortage on performance of Ethiopian Brewery companies; data were collected from focal persons through Likert scale and open–ended questionnaires. Qualitative data was also collected and analyzed with TAC Data collected from focal persons were analyzed qualitatively whereas data collected from closed ended survey questionnaires analyzed quantitatively by descriptive analysis to examine the effects of foreign currency shortage on the selected company’s performance. Study participants (survey, interviewees and Key informants) were selected purposefully and included in this research. Thematic Content Analysis (TCA) technique was used to analyze the data. A total of 22 individuals participated in the study. The triangulated findings (from Survey, document review, interview) showed that the company suffers from high (84.6%) cost of production that can confirm poor company performance. The study found that among the dominant transaction, the company spent more for raw material cost (38.8%) and labor cost (15.4%) which affects seriously the performance of the company. A number of factors are found out but 2 main categories of factors (Internal & External) identified that affect company performances in such a way that shortage of foreign currency affected the performance by declining the company’s productivity, machinery efficiency and the profit margin. Overall, the performance of the company found to be relatively low. The study found out higher level of severity company performance was found to be poor as it spent high cost of production indicating foreign currency shortage has effect on the parameters. The firm supposed to revise its plan and devise effective mechanisms to be more competitive as well as resist the dynamic changes as result of shortage of FC in the country. Also, the concerned bodies supposed to give an opportunity of tax reduction and holidays on the imported items and services, on the brewery companies to reduce the effect of foreign currency shortage on industry’s performance.Item Determinis of Internal Audit Effectiveness: in the Case of Ethiopian Airlines Group(A.A.U, 2022-11-08) Lidiya Teshome; Abebaw Kassie (PhD)The purpose of the study was to investigate determinants of internal auditing effectiveness in Ethiopian Airlines Group. Descriptive research design was employed to conduct the study and mixed research approach applied. The population of the study was employees of internal audit department which are sixty internal auditors. The study used the whole population by using census survey. The data collected from primary and secondary source of data. The primary data was collected by distributing questionnaires for sixty internal audit staff and the interview conducted from two managers of internal audit department. And the secondary data used by referring the audit manual of audit department. The data analyzed using descriptive data analysis. The collected data analyze in tables. According to the study the findings are, the department properly prepare annual plan and there is close follow up of audited section until solved and take corrective action. And there is less cooperation of auditee section through giving information and also there is a limitation on assignment reshuffling and staff size not compatible with company size. The auditor perform their task professionally, there is limitation on giving training for junior staffs and the auditor free from management interference. And the auditors communicate the gap and noncompliance issues to section manager. And Finally, based on the findings the possible recommendations, the audited section to be more cooperate to give information for the auditor and assignment reshuffling is continuously needed and to employed additional staff as per the capacity of company size and also need to participate the junior staff on trainings.Item The Effect of Asset and Liability Management on the Financial Performance of Private Banks in Ethiopia(A.A.U, 2022-04-06) Mekuanent Chanie; Temesgen Worku (PhD)The aim of study was to examine the effect of asset liability management on performance of Ethiopian private commercial banks from 2014 to 2020. In this research, the banks performance were measured by ROA and ROE while the ALM components that could affect performance were credit risk, liquidity risk, operational risk, market risk the composition of the banks’ asset they hold. For that purpose, panel data was collected from NBE covering period of 2014 to 2020. These panel data was analyzed by using Stata 14.2 econometric software. Quantitative research approach and explanatory research design was used to explain causal relation between variables. Furthermore, the study used multiple linear regression model with Generalized Least square estimation method. The findings of the research implied that, CA composition was dropped due to it causes multicollinearity problem. Fixed asset composition and credit quality have no significant effect on performance. The other variables such as LATD and RSAL had negative and significant effect, while TLATD has positive effect on ROE. Foreign exchange rate has positive and significant effect on both ROA and ROE while OEOI has negative effect. LATD and RSAL have positive and significant effect, but TLATD and RSAL were not significant determinants of ROA. The study concluded that fixed asset composition, loan to deposit ratio and non-performing loan were not significant determinants of Ethiopian private banks performance. On the other hand, foreign exchange rate, liquid asset to deposit ratio operational efficiency and interest rate risk were found significant determinants of Ethiopian private banks performance.Item The Effect of Credit Risk on the Financial Performance of Commercial Banks: Evidence From Selected Private Commercial Banks In Ethiopia(A.A.U, 2022-02-07) Tesfaye Ayalew; Habtamu Berhanu (PhD.)Banks are the biggest and foremost financial institutions that constitute the lion’s share of economic growth and development in both rich and poor countries around the world. To realize this, they need to maintain stable, continual and reliable financial performance through mitigating any form of risk in general and credit risk in particular since credit risk has profound effect bank profitability. As a result, the basic purpose of this investigation was to analyze the relationship between credit risk and bank profitability and recommend possible solutions. Accordingly, a ten year data (2011-2020) from seven sample private commercial bank’s secondary data were taken and analyzed. The result of econometrics regressions revealed that at 95% confidence interval credit risk measures (included in this study capital adequacy ratio, nonperforming loan ratio and loan loss provisions) have significant effect on performance measure return on equity keeping bank size constant. Eventually, the findings of the research concluded that significant correlation is existed between credit risk and bank profitability. Hence, the study has recommended that banks regarding to these predictive factors, need to develop efficient credit administration strategy to maintain trustful financial performance.Item The Effect of Credit Risk on the Financial Performance of Commercial Banks: Evidence From Selected Private Commercial Banks In Ethiopia(A.A.U, 2022-02-07) Tesfaye Ayalew; Habtamu Berhanu (PhD.)Banks are the biggest and foremost financial institutions that constitute the lion’s share of economic growth and development in both rich and poor countries around the world. To realize this, they need to maintain stable, continual and reliable financial performance through mitigating any form of risk in general and credit risk in particular since credit risk has profound effect bank profitability. As a result, the basic purpose of this investigation was to analyze the relationship between credit risk and bank profitability and recommend possible solutions. Accordingly, a ten year data (2011-2020) from seven sample private commercial bank’s secondary data were taken and analyzed. The result of econometrics regressions revealed that at 95% confidence interval credit risk measures (included in this study capital adequacy ratio, nonperforming loan ratio and loan loss provisions) have significant effect on performance measure return on equity keeping bank size constant. Eventually, the findings of the research concluded that significant correlation is existed between credit risk and bank profitability. Hence, the study has recommended that banks regarding to these predictive factors, need to develop efficient credit administration strategy to maintain trustful financial performance.Item Budgeting as a Means of Manangment Control System: The Case of Ethiopian Privaet Banks(A.A.U, 2022-12-07) Samuel Birga; Degefe Duressa (PhD)Management control systems (MCS) include techniques and mechanisms which organizations use to pursue objectives, accomplish goals and successfully pursue strategies. One of the Management control systems techniques and mechanisms is budget. Budget help to integrate, motivate, support in decision making, communicate objectives, give feedback and so much more in the organization. The researcher studied on budgeting as a means of management control system: The Case of Ethiopian private bank. The objective of the study was to study whether budget serves as means of management control system in Ethiopian private banks. The descriptive research design was used. The data was collected using structured questionnaire from 122 respondents of the staff of 12 private commercial banks of Ethiopia. The data was analyzed using SPSS. The study overviews the overall budgeting process in light of Management control systems of the bank. The study revealed that Budgeting system of the banks have problems/challenges in aligned with its strategic objective, and helps to fine Tune the long term plan to annual plan, the budget indicates performance parameters in a clearly measurable way, Budgeting process insisted the communication & learning process of different business units, Budgeting not focus on cross-functional core processes rather than isolated departmental and business unit performance, there are multidimensional performance measurement systems, that Budgeted performance linked with rewards and compensation system of the banks, the budget target did not fully comply with some of the attribute that help to use for motivational purpose. Finally, the study recommended the banks strategies should influences the adoption and implementation of budgeting system of the banks, Business unit should be accountable which they have no direct Control to empower them to influence the behaviors of other with direct control, The budget should be interactive and flexible tool that are able to cope with new environmental scenarios which stimulating the employee commitment.Item The Effect of Capital Structure on Financial Sustainability of Microfinance Institutions in Ethiopia: A Panel Data Approach(A.A.U., 2022-11-03) Berhanu Shanco; Alem Hagos (PhD)This study examined the effect of capital structure on the financial sustainability of microfinance institutions (MFIs) in Ethiopia. The study was conducted using panel fixed effect multiple regression model during the 2011-2020 period. Due to data availability, out of a total of 49 MFIs in Ethiopia, only 20 MFI panels are included to examine the MFIs’ capital structure on financial sustainability. The purposive non-probability sampling was used to select samples based on the availability of financial data and the duration of the microfinance institutions' existence. The data analysis included both descriptive and inferential statistics. The confidence levels p<.01, p<.05, p<.1 were used to test the hypotheses. The study used operational self-sufficiency (OSS) as a measure of financial sustainability as dependent variable and four capital structure measures including capital-to assets (CAR), debt-to-equity ratio (DER), deposit-to-loan ratio (DLR) and deposit-to-assets ratio (DAR) as independent variable. Other factors affecting financial sustainability are considered as control variables including size of the MFIs, age of the MFIs and risk (measured by portfolio at risk). The study discovered that financial sustainability is positively correlated with capital-to-assets ratio (CAR) and deposit-to-loan ratio (DLR), at a 5% level, this association is statistically significant. On the other hand, the ratios of debt to equity (DER) and deposits to total assets (DAR) have very little bearing on OSS. According to the findings, operational self-sufficiency (OSS) for MFIs will typically rise by 2.8% for every percentage increase in DER while falling by 5.7% for every percentage increase in DAR. MFIs in Ethiopia must take prudence while building portfolios because the choice of a portfolio had a negative effect on sustainability. From the findings, it is strongly recommended that microfinance institutions in Ethiopia should also work to increase their repayment rates. The broad market access, information sharing, and portfolio quality monitoring that have a positive impact on long-term financial sustainability may be crucial for this purposeItem Determinants of Non-Performing Loan of Commercial Banks in Ethiopia(A.A.U., 2022-02-03) Azeb Shimelis; Abebaw Kassie ( PhD)This study Examine the bank Specific bank economic determinants of commercial banks in Ethiopia .Non-Performing Loan (NPL) has been crucial factor these days in terms of Banking sector sustainability and profitability. This paper intends to assess factors that may influence the rising level of nonperforming loans in commercial banks of Ethiopia. The study uses, Capital Adequacy Ratio and Loan to deposit ratio as specific determinants of nonperforming loans and Inflation rate, Exchange rate and UN employment rate as macro economic factors. Panel data from 2008-2018 was taken from published annual reports and NBE data base. Descriptive Statistics, correlation analysis and random effect panel least square regression was used to analyze data through STATA 14 application software. The analysis leads to the conclusion that reduced level of nonperforming loans leads to increased banks performance. It was also concluded that Exchange rate and unemployment rate has got a negative significant impact on non-performing loans. On the other hand the finding showed Insignificant relationship loan to deposit, capital adequacy and inflation rate. The study suggests that, commercial banks should consider specific and the macro economic factors before extending loans