Accounting and Auditing

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Determinants of CapitaI Market DeveIopment in Ethiopia
(Addis Ababa University, 2026-06-02) Hermela Gebreselassie; Abebaw
Capital market development plays a vital role in mobilizing long-term savings, promoting investment, and supporting economic growth. This study examines the relationship between inflation, interest rates, and capital market development in Ethiopia using annual time-series data from 1990/91 to 2024/25. Due to the recent establishment of the Ethiopian Securities Exchange (ESX) and limited historical capital market data, the study uses financial development indicators as proxies for capital market development. Secondary data were obtained from the National Bank of Ethiopia, the Ethiopian Statistical Service, and other relevant sources. The analysis employed descriptive statistics, Augmented Dickey-Fuller (ADF) unit root tests, Johansen cointegration analysis, and the Vector Error Correction Model (VECM) to examine both short-run and long-run relationships among the variables. The findings reveal that inflation has a significant negative effect on capital market development, indicating that macroeconomic instability can hinder financial market growth and long-term investment. Interest rates show mixed effects, reflecting their complex influence on savings, investment, and financial sector development. The results also confirm the existence of a long-run relationship among the variables, emphasizing the importance of a stable macroeconomic environment for capital market growth. The study concludes that maintaining price stability and an efficient interest rate environment can support the development of Ethiopia’s emerging capital market. Future studies should reassess these relationships as more comprehensive capital market data become available through the expansion of the Ethiopian Securities Exchange
Impact of Ethiopia’s Integrated Budget and Expenditure Accounting Information System on Financial Management of Donor Funded Government Projects in Ethiopia
(Addis Ababa University, 2026-05-02) Sebhatleab Amanuel; Kelifa Srmolo
System (IBEX) on the financial management of donor-funded government projects. Agency Theory, Stewardship Theory, Diffusion of Innovations Theory, and TOE Framework were utilized to propose an understanding of IBEX as a multidimensional construct involving such IBEX characteristics as transparency, efficiency, compliance, integration, usability, and credibility. The research methodology involved a quantitative cross-sectional survey design with data being collected from 236 project stakeholders, including project managers, finance officers, accountants, and budget officers ,working on donor-funded projects within different regions in Ethiopia. According to the multiple regression results, six IBEX characteristics together accounted for 62.3% of the variance in the project financial management performance (R² = 0.623, p < .001). In particular, system efficiency showed the greatest impact on the outcome (β = 0.271, p < .001), whereas credibility came second (β = 0.215, p < .001). Transparency (β = 0.198, p = .001), compliance (β = 0.176, p = .002), integration (β = 0.148, p = .008), and usability (β = 0.123, p = .038) demonstrated lower yet statistically significant relationships with the financial management outcome. Overall, the paper proved that IBEX has substantially contributed to the transformation of Ethiopian public financial management especially concerning the increase of transparency, compliance, and credibility. At the same time, some issues regarding system integration, usability, and donor confidence should be addressed further. Based on the results obtained, recommendations were formulated concerning improving system efficiency, strengthening technical support, accelerating IBEX integration of donor-funded projects, and developing IBEX donor compliance features.
Impact of Ethiopia’s Integrated Budget and Expenditure Accounting Information System on Financial Management of Donor Funded Government Projects in Ethiopia
(Addis Ababa University, 2026-05-02) Sebhatleab Amanuel; Kelifa Srmolo
This study investigated the impact of Ethiopia's Integrated Budget and Expenditure Accounting System (IBEX) on the financial management of donor-funded government projects. Agency Theory, Stewardship Theory, Diffusion of Innovations Theory, and TOE Framework were utilized to propose an understanding of IBEX as a multidimensional construct involving such IBEX characteristics as transparency, efficiency, compliance, integration, usability, and credibility. The research methodology involved a quantitative cross-sectional survey design with data being collected from 236 project stakeholders, including project managers, finance officers, accountants, and budget officer,working on donor-funded projects within different regions in Ethiopia. According to the multiple regression results, six IBEX characteristics together accounted for 62.3% of the variance in the project financial management performance (R² = 0.623, p < .001). In particular, system efficiency showed the greatest impact on the outcome (β = 0.271, p < .001), whereas credibility came second (β = 0.215, p < .001). Transparency (β = 0.198, p = .001), compliance (β = 0.176, p = .002), integration (β = 0.148, p = .008), and usability (β = 0.123, p = .038) demonstrated lower yet statistically significant relationships with the financial management outcome. Overall, the paper proved that IBEX has substantially contributed to the transformation of Ethiopian public financial management especially concerning the increase of transparency, compliance, and credibility. At the same time, some issues regarding system integration, usability, and donor confidence should be addressed further. Based on the results obtained, recommendations were formulated concerning improving system efficiency, strengthening technical support, accelerating IBEX integration of donor-funded projects, and developing IBEX donor compliance features.
The Impact of international Public Sector Accounting Standards (IPSAS) Adoption on Financial Reporting Quality: The Case of African Union Commission (AUC)
(Addis A baba University, 2026-06-02) Aynalem Bekele; Degefe Duressa
The study sought to examine the relationship between adopting IPSAS and financial reporting quality at the African Union Commission. Through explanatory research design, the study analyzed the relationship between six aspects of IPSAS adoption including policy commitment, system readiness, human competence, governance support, resource provision, and implementation maturity and the quality of financial reporting. The primary data used for the analysis was collected using a structured questionnaire from 209 respondents. Statistical Package for Social Sciences (SPSS) 26.0 was used to analyze the data through computation of descriptive statistics, correlations, and multiple regressions. The results revealed that the six independent variables had a statistically significant positive relationship with financial reporting quality. Together, they explained 62.1% of the variance (R² = 0.621, p < 0.001). In particular, policy commitment had the highest impact on financial reporting quality (β = 0.299, p < 0.001), followed by governance support (β = 0.248, p < 0.001), system readiness (β = 0.172, p = 0.002), human competence (β = 0.146, p = 0.013), resource provision (β = 0.138, p = 0.015), and implementation maturity (β = 0.116, p = 0.033). Financial reporting quality at the African Union Commission was found to be moderate (M = 3.50). Thus, it can be concluded that IPSAS adoption has resulted in an improvement in the quality of reporting at the AUC; nevertheless, there is still room for further progress. In particular, the findings highlight the need for the development of such areas as leadership, internal audit effectiveness, FMIS capacity, training initiatives, and resource availability for IPSAS adoption. Finally, the research calls for future exploration of IPSAS implementation at regional and international organizations in order to derive relevant lessons and best practices.
The Effects of Digital Tax Administration Systems in Enhancing Taxpayer Compliance; Evidence from Federal Ministry of Revenue in Addis Ababa
(Addis Ababa University, 2026-01-01) Fedlu Temam; Takele Fufa
This study investigated the effect of digital tax administration system features on tax compliance of federal taxpayers in Addis Ababa, Ethiopia. It focused on six key dimensions: system usability, technological literacy, perceived trust, training and support, perceived benefits, and enforcement visibility. An explanatory research design was employed to examine the causal relationships between these variables and compliance behavior. Primary data were collected through structured questionnaires administered to sample 385 respondents selected from both category A and B taxpayer population. A mixed sampling method was employed, which included the simple random and convenience sampling methods. Descriptive statistics, correlation, and multiple regression analysis were employed to test the hypotheses. Overall, the results indicate that the issue of system functionality, especially usability and support, is more significant in influencing compliance than the concept of trust or deterrence. This is further evidence that taxpayers in Ethiopia are most likely to respond to systems that are functional and user-friendly, with responsive support. On the other hand, this research also has implications in the theoretical development of digital governance and taxpayer behavior in developing countries, as it proves that compliance is less influenced by institutional attitudes and more by utility. In this regard, the implications are clear, and it is imperative that efforts be made to improve digital tax systems and service delivery, as well as promote voluntary compliance through user-centric initiatives to improve Ethiopia’s revenue systems and overall public sector transformation.
Determinants of profitability of Large and medium sized commercial banks in Ethiopia.
(A.A.U, 2026-01-03) Natnael Mengistu; Yared Asrat
This study investigates the determinants of profitability for large and medium-sized commercial banks in Ethiopia from 2020 to 2024, a period marked by significant economic shocks, political instability, and regulatory reforms such as the Home-Grown Economic Reform program. Using a quantitative panel data design and EGLS estimation, the research evaluates the impact of six bank-specific variables Financial Leverage (FL), Asset Quality (AQ), Operating Expense Ratio (OER), Loans to Deposits Ratio (LDR), Net Interest Margin (NIM), and Asset Growth (AG)—on Return on Assets (ROA). The findings reveal that Asset Quality (measured by NPL ratio), Operating Expense Ratio, and Financial Leverage have significant negative effects on profitability, alignng with the Risk-Return Trade-off Theory and the Efficiency Structure Hypothesis. Conversely, Net Interest Margin and Asset Growth demonstrate a positive relationship with ROA, while the Loans to Deposits Ratio shows no significant correlation due to restrictive regulatory caps on credit disbursement during the study period. Ultimately, the study concludes that operational efficiency and rigorous credit risk management are the primary drivers of sustainable performance for Ethiopian banks in volatile environments, providing critical insights for bank management and policymakers. Key Words: Bank Profitability, Return on Assets (ROA), Ethiopian Banking Sector, Net Interest Margin (NIM), Operating Expense Ratio (OER), Asset Quality (NPL), Financial Leverage, Regulatory Reform, Panel Data Analysis
The Challenges and Opportunities of Adopting Cryptocurrency in Ethiopia.
(Addis Ababa University , 2025-06-28) Zekarias Kasahun; Kelifa Srmolo
Crypto currencies have emerged as a revolutionary financial innovation, offering both significant challenges and opportunities for economies worldwide. This research explores the adoption of crypto currency in Ethiopia, a country with a burgeoning digital landscape and a rapidly evolving financial sector.This research focuses on the challenges and opportunities associated with the adoption of cryptocurrency in Ethiopia, where digital finance is new to the country's landscape. Very few studies have explored the cryptocurrency ecosystem in Ethiopia and this research is guided by an extended Unified Theory of Acceptance and Use of Technology known as UTUT2. The key variables focused on in our model are performance expectancy, effort expectancy, social influence, facilitating conditions, price value, perceived knowledge, and perceived risk. A mixed-methods approach was employed, with the first half of the data collected as quantitative responses from a structured survey from 201 respondents located in Addis Ababa and then fielding qualitative insights within interviews from professionals working in finance, national and local government and technology related professions.The findings show there is increased awareness of cryptocurrency use (especially with the younger generation; tech savvy) and there are limited adoption behaviours due to several challenges. The main challenges sustaining cryptocurrency adoption are: poor internet infrastructure, inconsistent power supply, limited digital literacy, inefficient cyber security systems and lack of regulatory infrastructure Additionally, the current action where the National Bank of Ethiopia has placed a "ban" on cryptocurrency is an institutional challenge to overcoming adoption behaviours. Challenges aside, there are opportunities in the Ethiopian environment. Awareness about digital economy solutions is increasing, the rate of mobile phone ownership is high, there is a desire amongst youth to explore alternatives to banking and Bitcoin mining, and the potential to innovate with blockchain technology and unnamed digital financial services solutions that could benefit developing economies. Ethiopia could be seen as a country with multiple crypto/digital solutions and potential for adoption and growth.Quantitative analysis confirmed that adoption behaviours were influenced by effort expectancy, performance expectancy, perceived knowledge and perceived risk. Based on the findings and outcomes of the study, recommendations are made for the use of targeted public awareness campaigns, investments in digital infrastructure, increased cybersecurity solutions, and a balanced regulatory framework to govern cryptocurrency use.
Exploring the Role of Mobile Payment and Financial Inclusion on the Consumption Behaviours and Entrepreneurial Decisions: Micro-Level Evidence from Ethiopia A
(AAU, 2025-12-01) Meskerem Bogale; Abbi M. Kedir
This study examines the role of Financial Technology (FINTECH) and financial inclusion in shaping household economic behaviour in Ethiopia, focusing on entrepreneurship and consumption, while accounting for informal networks such as Iddir. Grounded in behavioural economic and technology adoption frameworks, it applies the Pain of Paying Theory (Zellermayer, 1996), Conditioning Theory (Feinberg, 1986; Boden et al., 2020), and Double-Entry Mental Accounting Theory (Quispe-Torreblanca et al., 2019; Raghubir& Srivastava, 2008) to explain how digital payment methods influence consumer decisions. Roger’s (2003) Diffusion of Technology Theory guides the understanding of how financial technology adoption fosters entrepreneurship and financial inclusion. Trust in digital financial services is highlighted as a critical factor influencing adoption and usage. Using nationally representative data from the 2018/2019 Ethiopian Socioeconomic Survey (ESS4), the study analyses interactions between mobile payment, financial inclusion, informal finance, trust, and household outcomes. Results show that mobile payment alone may have limited influence on entrepreneurship due to barriers such as digital literacy, accessibility, and low trust. However, integration with informal systems like Iddir substantially enhances entrepreneurial participation, as Iddir facilitates risk-sharing and builds social trust. Formal financial services like savings, insurance, and borrowing complement digital and informal mechanisms, supporting business engagement and boosting household consumption, particularly among lower- and middle-income households. The study contributes in three ways. Theoretically, it extends behavioural and technology adoption frameworks to the Ethiopian context, showing how digital, informal, and trust-based mechanisms shape household economic decisions. Empirically, it provides the first comprehensive, country-level evidence on the interplay of mobile payment, financial inclusion, informal finance, entrepreneurship, and consumption. Methodologically, it employs univariate, multivariate, and simultaneous quantile regression modelling approaches to capture complex interactions. Overall, findings emphasize integrating informal financial structures and trust-building measures into digital finance policies to promote inclusive and sustainable economic development in Ethiopia. Keywords: Financial Technology, Financial Inclusion, Household Consumption, Household Entrepreneurship, Iddir, Ethiop
The Effect Of Internal Auditing Practices In Enhancing Financial Accountability: The Case Of Selected Foam Manufacturing Firms In Addis Ababa
(A.A.U, 2026-01-02) Sisay Tadesse; Degefe Duressa
This study examines the effect of internal auditing practices on financial accountability in foam manufacturing firms in Addis Ababa, with particular emphasis on audit structure and Auditor independence, audit frequency and scope, auditor competency, audit tools and technology, and the implementation of audit recommendations. Guided by agency theory and control theory, the study employed a mixed-methods research design, collecting quantitative data from 76 internal auditors, finance officers, and managers through structured questionnaires and qualitative data through semi-structured interviews. Quantitative data were analyzed using descriptive statistics, correlation analysis, and multiple regression analysis with SPSS version 27.0.1, while qualitative data were analyzed using thematic analysis. The findings reveal that the implementation of audit recommendations has a strong and statistically significant positive effect on financial accountability, whereas other internal auditing dimensions exhibit positive but statistically insignificant effects. The study concludes that financial accountability is enhanced primarily through effective follow-up and implementation of audit findings rather than the mere existence of audit structures or audit resources, and it recommends that management strengthen mechanisms for timely implementation and monitoring of internal audit recommendations to improve financial accountability in the firm.
The Effects of Determinants in Approval Process of Agricultural Loan Finance: Case of Development Bank of Ethiopia.
(A.A.U, 2025-01-27) Zewdneh Gashaw; Habtamu Berhanu
This thesis examines the effects of determinants in approval process of agricultural loan finance: case of development bank of Ethiopia. Loan determinants are critical in approval process of agriculture loan; influencing various aspects this study examines the effects of loan size, interest rate, repayment period and collateral on approval process of agriculture loan from DBE. The researcher utilized explanatory and descriptive research design and quantitative research approach. The research were conducted in DBE head office employees, out of three departments 443 employees was selected and draw 210 respondents by using stratified sampling method. Structured questionnaires were distributed and collected to get primary data. The study employs regression analysis to explore the relationship between loan determinants and approval process of agriculture loan. The findings of the study reveal that loan size, repayment period and collateral has a significant positive effect on approval process of agriculture loan, fostering higher levels of approval process of agriculture loan and in contrast the study found that interest rate has negative and insignificant effect on approval process of agriculture loan. Hence, the study suggests that the organization must develop more ground to simplify and digitalize the above determinants in order to increase approval process of agriculture loan towards meet the development goal of the country. The study provides valuable insights for future research and organizational operations aiming to improve the effects of loan determinants and future outcomes.
Determinants of Asset Quality, in Ethiopian Commercial Banks
(A.A,U, 2025-05-07) Adane Abebe; Temesgen Worku
The stability and performance of the banking sector are critically influenced by the quality of its assets. This study investigates the key determinants of asset quality among commercial banks in Ethiopia. Using panel data from Sixteen Ethiopia commercial banks which are purposely selected from thirty commercial banks that operate in Ethiopia based on asset size and been established and fully start their operations before the year 2014. The period of the study has covered the year from 2014 to 2023. The study employs a quantitative research approach, incorporating fixed effects and random effects models to examine the relationship between asset quality measured primarily by the non-performing loan to total asset (NPLTR) and a set of bankspecific and macroeconomic variables. The findings reveal that bank-specific factors such as Bank size, capital adequacy, cost of funds,return on asset and loan to deposit ratio significantly affect asset quality. Additionally, from macroeconomic variable, which is inflation, exhibit a notable influence on non-performing loans. The results indicate that high credit expansion without strict risk assessment mechanisms tends to deteriorate asset quality, while sound capital positions and efficient management improve it. The study concludes that both internal banking practices and external economic conditions play a crucial role in determining asset quality. It recommends that Ethiopian commercial banks strengthen their credit risk management frameworks and that policymakers ensure a stable macroeconomic environment to safeguard the health of the banking sector.
Effect of Internal Audit on Organizational Performance: the Case Study of Nib International Bank
(A.A.U, 2025-06-04) Tsion Alemu; Abebaw Kassie
This research paper the effect of internal audit on organizational performance at Nib International Bank with a specific focus on examining how internal auditor independence, audit quality, management support, and auditor risk evaluation practices influence the bank's performance. The research methodology employed a quantitative research approach, data were collected from 71 respondents across the internal audit, finance, and risk departments using structured questionnaires. Descriptive and inferential statistical tools, including correlation and regression analyses, were used to analyze the data. the findings reveal that internal auditing plays a significant role in enhancing organizational performance by strengthening risk management, improving internal controls, and increasing operational efficiency. The study also highlights that auditor independence and management support are critical factors in ensuring audit effectiveness. In addition, the correlation study demonstrates a strong and positive relationship between the organization's audit performance and the elements influencing auditing. Based on the findings, this paper proposes recommendations to strengthen internal audit practices for improved performance. This research contributes to the understanding of internal auditing's role in the organization.
Efect of Loan Portfolio on Financial Performance: Evidence from Selected Private Commercial Banks in Ethiopia
(A.A.U, 2025-01-08) YezineYirga; Alem Hagos
Lending portfolio means allocation of credit to different sectors, rather than focus on few sectors. Should banks and Micro finance institutions engage in diversification or concentrate (focus) their credit portfolio is a basic concern in banking industry. The objective of this research was to find out how Ethiopian commercial banks' lending portfolios affected their bottom lines. From 2013 to 2023, 11 Ethiopian commercial banks were sampled for the study's balanced panel data. The Ministry of Finance, each bank's website, and the National Bank of Ethiopia provided the data. Explanatory research design and a quantitative technique were used to accomplish the study's goals. The study's independent variables were loan diversification as determined by the diversification index, bank size, equity ratio, non-performing loan,loan to asset ratio, liquidity ratio, gross domestic product, and inflation rate, while the dependent variable was the financial performance of the banks as determined by return on asset (ROA) and risk adjusted return on asset (RAROA). The study employed a random effect model for risk-adjusted return on asset and a fixed effect model for return on asset for data analysis. The empirical finding shows that bank-specific factors (ROA and RAROA) play a significant role to affect Ethiopian banks’ financial performance. These factors, which have a statistically significant and favorable impact on Ethiopian commercial banks' financial performance, include the diversification index, bank size, equity ratio, and liquidity ratio. On the other hand, the loan to asset ratio and non-performing loans have a statistically significant negative impact. Macroeconomic variable such as GDP and inflation has insignificant positive effect. The study mainly recommends that, to improve credit quality it is better to diversify loan to various sectors, because, it minimized idiosyncratic risk and enhance financial performance. And,management bodies of commercial Banks try to monitor credit risk by economic sector.
Determinants of Financial Performance and Evaluation of Mohan Plc
(A.A.U, 2025-06-05) Alemeshet Girma; Sewale Abate
The financial performance of firms is influenced by a complex interplay of internal and external factors, yet limited research examines these determinants holistically, particularly in the context of emerging markets. This study investigates the combined effects of firm-specific, industry specific, market, regulatory, and sustainability factors on the financial performance of Mohan plc, an Ethiopian firm operating in a dynamic and competitive environment. Addressing critical research gaps, this study applies a comprehensive analytical framework to explore how these variables interact to influence financial outcomes. Using quantitative methods, the study analyzes data from 302 respondents to identify significant predictors of financial performance.The findings reveal that firm-specific factors, regulatory environments, industry-specific factors, and sustainability practices significantly contribute to financial success, while market factors show a less pronounced impact. These results align with established theories, including the Resource-Based View and Institutional Theory, underscoring the importance of leveraging internal strengths, adhering to regulatory standards, and integrating sustainable practices. This research provides valuable insights for managers, policymakers, and academics seeking to enhance financial performance in emerging markets. By bridging theoretical and practical perspectives, the study contributes to a deeper understanding of the determinants of financial performance in resource-constrained and evolving economic contexts.
Effectiveness of Performance Audit in Addis Ababa Audit Office
(A.A.U, 2025-06-09) Bethel Haddis; AbebawKassie
This project examines the effectiveness of performance auditing in the public sector,focusing on the Addis Ababa Audit Office General (AAAOG). Performance audits are instrumental in promoting transparency, accountability, and efficient public resource utilization. However, the effectiveness of these audits often depends on a range of organizational and operational factors. This research aims to identify the key factors influencing performance audit effectiveness, including auditor competency, audit criteria,management and supervisory support, cooperation from auditees, adherence to audit standards, and post-audit follow-up mechanisms. Using a descriptive research design, data were collected from performance auditors, auditees, through structured questionnaires. Quantitative data were analyzed using SPSS, applying descriptive statistics and frequency analysis. The findings revealed that while AAAOG has demonstrated strong performance in executing planned audits, challenges remain, predominantly concerning inadequate compensation, limited feedback mechanisms, and audit resource constraints. Nevertheless, high levels of auditor awareness, established audit standards, and strong cooperation from auditees have positively influenced audit outcomes. The study concludes that enhancing auditor training, improving managerial feedback systems, and addressing compensation gaps are critical for strengthening performance audit effectiveness. Recommendations include increased investment in auditor capacity, refinement of performance audit manuals, and institutional reforms to reinforce post-audit accountability. These findings contribute to the improvement of public sector governance and resource management in Ethiopia
The Role of an Internal Auditing in Achievement of Organizational Objectives in the Case of Commercial Bank of Ethiopia
(A.A.U, 2025-06-05) Edom Wubeshet; Takele Fufa
This study was examined the role of internal auditing in achievement of organizational goals, in the case of the Commercial Bank of Ethiopia. This study focuses research questions related to the responsibilities of auditing, their contribution to risk management, corporate governance, and internal control processes, the effect of auditing independence on audit quality and organizational objectives, and the challenges faced in carrying out auditing their duties. The project research uses a descriptive research design, merging qualitative and quantitative approaches. The primary source of data collection was through questionnaires to employees of the Commercial Bank of Ethiopia, and from secondary sources such as current documents and reports. The sample size consists of 70 employees, determined using Israel’s formula. Both open-ended and close-ended questions, is questionnaires from primary data collection method. STATA was used to analyze the collected data, using descriptive analysis techniques. Internal auditing helps to identify the actual and potential risk, helps to fill the process of decision making and policy development etc. Respondent express their response from neutral to strongly agreed for role of internal auditing if there is internal auditing independence, overall internal control process, overall corporate governance and risk management process. This implies internal auditing have higher role for achievement of organizational objective of commercial bank of Ethiopia if there is internal auditing independence, overall internal control process, overall corporate governance and risk management process. Internal auditing is expected to find creative ways to cope up with dynamic environment that will add value to the organization. This is achieved mainly when there is internal auditing independence, overall internal control process, overall corporate governance, and Risk management process. Internal auditing have better role for achievement of organizational objective if there is internal auditing independence, overall internal control process, overall corporate governance and risk management process. Internal auditing independence has better value for achievement of organizational objectives in the case of the Commercial Bank of Ethiopia. Auditing in dependency helps to avoid misstatement, subjectivity of audit report, biased, conflict of interest, hide of important fact, deny of information and records etc. so commercial bank of Ethiopia should protect the in dependency of auditing to achieve organizational objective and improve their role. Commercial bank of Ethiopia should also improve internal control process of internal auditing, overall corporate governance and risk management process of internal auditing.
The Effect of Risk Management on Financial Performance of Commercial Banks in Ethiopia
(A.A.U, 2025-06-05) Abel Wassu; Takele Fufa
The main aim of this study was to identify the effect of risk management on the financial performances of selected commercial banks in Ethiopia with a sample size of 16 commercial banks, covering the fiscal year of 2017/18-2023/24. To achieve this objective quantitative research approach were employed. Secondary data were gathered from NBE databases and annual audited financial statements of commercial banks. To comply with these objectives the study has used a panel data model with random effect generalized least squares regression (GLS). To test the hypotheses developed based on the literature review, the collected data were organized and assessed for the fulfillment of linear regression assumptions and apply the random effects linear regression model. The study's findings indicate that liquidity risk management, interest rate risk, and foreign exchange risk have a statistically significant and positive relationship with the return on asset of banks. In contrast, operational risk and bank size show a statistically significant and negative relationship with financial performance. However, the relationships of credit risk, capital risk, and the loan loss provision with financial performance were found to be statistically insignificant. Based on the findings of the study the researcher recommended that commercial banks in Ethiopia adopt a sound and effective management of risks mainly, liquidity risk, interest rate risk, foreign exchange risk, and operational risk to enhance their financial performance ensure sustainable growth, and boost investor confidence. Additionally, it is recommended that the regulatory body address the proper measurement of financial metrics among banks including mainly liquidity ratio, and efficiency ratio to comply with international standards as well as establish rules that will ensure effective disclosure of financial information of banks including, foreign currency-related data.
Performance, Challenges, and Prospects of the Lease Finance Sector in Ethiopia: the Case of Addis Capital Goods Finance Company, Oromia Capital Goods Finance Company, and Debub Capital Goods Finance Company
(A.A.U, 2025-06-22) Temesgen Menza; Temesgen Worku
The lease finance sector plays a critical role in fostering economic development by providing financing for businesses, particularly in emerging markets like Ethiopia. Hence, the primary purpose of this study, titled Performance, Challenges, and Prospects of the Lease Finance Sector in Ethiopia: The Case of ACGFC, OCGFC, and DCGFC, is to evaluate the financial performance of three prominent capital finance companies while identifying the prevailing challenges and outlining future growth opportunities in the sector. This study employs a mixed-methods approach, employing both qualitative and quantitative data collection methods. Research design was descriptive. A combination of random and purposive sampling methods was employed to select respondents from the study population. The instruments were a questionnaire, interview and an Annual Audited data review. The data gathered was analyzed using descriptive statistics, which included tables, charts, frequency distributions, and percentages. A total of 76 questionnaires were analyzed alongside financial performance metrics from 2016 to 2023. Key financial ratios, Return on Assets (ROA) and Return on Equity (ROE), were utilized to assess the companies' profitability and operational efficiency. The data statistics were produced using the 25th version of the Statistical Package for Social Sciences (SPSS). The findings reveal that the Ethiopian lease finance sector, while possessing significant growth potential, faces numerous challenges: a lack of leasing expertise, absence of equipment valuers, and restrictions on product types. Further impediments include foreign currency shortages, lack of credit history, funding constraints, and a regulatory framework not conducive to business operations. Leasing companies also suffer from a limited number of domestic equipment suppliers, and a general lack of public awareness. Compounding these issues are political instability, rising machinery prices due to inflation, and fluctuating foreign exchange rates, which create financial strain for leasing companies and their SME clients. Despite these barriers, the research suggests substantial prospects for the lease finance sector in Ethiopia. Government commitment, fast economic growth and a high growing market, all together puts positive futurity or prospects of the business. This is supported by both the survey and interview findings. Conclusion and recommendations are given based on the survey and interview results.
The Role of Internal Audit Function in Promoting Effective Corporate Governance: the Case of National Bank of Ethiopia
(A.A.U, 2025-06-07) Berhanu Retta; Temesgen Worku
This study examines the role of internal audit function in promoting effective corporate governance in the case of the National Bank of Ethiopia. Aware that sound governance mechanisms help ensure stability and accountability in financial institutions, the study examines how the prominent characteristics of the internal audit function, including independence, competence, auditing methodology, professional ethics, and support from management, impact governance effectiveness. Using a framework approach, the study applied a mixed-method approach, combining quantitative data gathered through structured questionnaires with qualitative information gathered through key informant interviews. The target population consisted of auditors, senior managers, and executive managers in the Bank. 72 usable questionnaires were received for analysis. Data were processed using SPSS 25, applying descriptive and inferential statistical methods, including linear regression analysis, to determine the relationship between internal audit characteristics and the outcomes of corporate governance. The findings indicate that support from management, auditor competence, and conformity with professional ethics significantly contribute towards the effectiveness of the internal audit function in augmenting sound governance practices. In addition, audit independence and the use of internationally accepted auditing methods emerge as the determinants for sound oversight and accountability. The study contributes to the academic literature through the provision of empirical insights drawn from the central banking scenario and the provision of pragmatic tips for the reinforcement of the internal auditing function in regulatory agencies. It highlights the need for the internal audit practices in the country to conform to international standards for it to be firm in ensuring sound governance and institutional integrity.
Effect of Risk-Based Auditing on Internal Control (Case Study on Ethio Telecom)
(A.A.U, 2025-06-17) Belete Gebru; Alem H.
Scholars are noted that effective internal-auditing Control serving as guaranty and consulting activity to supports organizational goals by improving governance, oversight and risk mitigation. This study was conducted to achieve objective stated as investigate the impact of Risk-Focused Auditing of Internal Controls effectiveness in the case of Ethio Telecom. The research used qualitative and explanatory research methods and collected data through primary and secondary source by using survey method to collect data from 70 internal audit and management staff in the head office of Ethio telecom. The Study employed methods for census sampling. Multiple regression analysis uses descriptive statistics to identify the causal relationship between Risk based Auditing and internal audit activity. The finding indicates that internal audit department gap Lack of BOD support, resource, training and certify auditor, The scope of risk management and control systems implemented by internal auditors interferes with daily operations, No Audit committee establish, Limitation Publishing audit reports and recommendation. According to the regression output all independent variable effect the company performance and making of the contribution for company performance. The Board of Directors (BOD) of the organization is committed to enhancing development capacity through the provision of training and certification via short-term programs. This initiative aims to ensure there is an adequate number of officers while effectively mitigating resource constraints. The internal audit division of the firm plays a crucial role in the effective identification and analysis of risks, offering suitable risk recommendations, and implementing robust governance and internal control measures.

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