Accounting and Finance Dissertation

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Influence of Capital Structure on Financial Performance of Manufacturing Companies In Ethiopia
(Addis Ababa University, 2026-01-01) Tsegereda Tefera; Abebe Yitayew
This study focuses on how capital structure affect the financial performance of manufacturing firms in Ethiopia. The study applied explanatory research design with quantitative approach. It examines how various capital structure variable such as, total debt-to-total assets ratio (TDTA), long-term debt-to-equity ratio (LTDTE), and short-term debt-to-equity ratio (STDTE) impact key performance indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM). The study also considers firm size (SZ) as a control variable. It uses secondary panel data from the annual audited financial statements of 10 (Ten) manufacturing companies in Ethiopia over the period of five years from 2020 to 2024 G.C. and non-probability purposive sampling method were used to select the samples. Most of the data were collected from Ministry of Revenue Large Taxpayers Office. The study used multiple regression models to test the effect of capital structure on financial performance by applying Ordinary least square (OLS) regression and using SPSS software Version 23 for data analysis. The findings disclose that, total debt to total assets (TDTA) and long-term debt to equity (LTDTE), shows a statistically significant negative effect on return on assets (ROA) and net profit margin (NPM). Conversely,short-term debt to equity (STDTE) shows a positive but statistically insignificant impact on ROA and NPM. Firm size (SZ) demonstrates a statistically significant negative effect on ROA but an insignificant negative effect on NPM. Regarding return on equity (ROE), variables such as LTDTE, STDTE, and SZ have an insignificant negative impact, while TDTA shows a statistically significant positive effect. Therefore, the findings show that optimizing capital structure requires more understanding of how different types of debt influence various aspects of financial performance, emphasizing the importance of strategic decision-making in financing choices.Based on these insights, the study recommended that financial managers within the manufacturing sector carefully manage their debt levels, aiming to reduce excessive leverage to enhance profitability. Key word: - Capital structure, Financial Performance, Manufacturing companies, ROA, ROE,NPM, TDTA, TDTE, STDTE, Firm Size
The Effect of Digitalization on Financial Performance: the Case of Selected Commercial Banks in Ethiopia
(A.A.U, 2025-05-18) Dibora Bitwoded; Takele Fufa
The banking sector in Ethiopia is a driving force in the country's economy, consisting of one state owned bank and 29 private commercial banks. This paper sought to offer understanding into how digitalization has influenced the performance of selected Commercial banks in Ethiopia by using return on equity as the indicator of financial performance. ROE (return on equity) is usually used to measure the performance of banks and is often regarded as an index of financial performance. The paper used secondary data, which was gathered from the head offices & annual reports of eight commercial banks which were selected by using purposive sampling method, covering the years 2022 to 2024. A causal research approach was used to identify the association among the different factors under study. In the study, the researcher tried to analyze how independent variables, which are digitalization services including number of debit card users, value of ATM transactions, value of POS transactions, number of mobile banking users, value of mobile banking transactions, value of internet banking transactions & bank size (control variable) affect financial performance. The researcher assumed that digital transformation has a positive effect on banks’ financial performance. The data was analyzed by using the random effect regression technique with descriptive and correlation analyses conducted through the econometric software STATA version 15. The regression analysis indicated that from bank specific variables, value of ATM transactions and number of mobile banking users had a positive and significant effect on bank’s performance as measured by return on equity which showed that an increase in these variables had a positive effect on the financial performance of commercial banks. Bank size, a control variable the researcher used also had a positive effect on the ROE. Keywords Digitalization; ATM; Commercial Banks; Internet banking; Mobile banking; POS; ROE
Pastoralist Households’ Willingness to Pay For Index-Based Livestock Insurance in Borana Zone: The Case of Moyale Woreda
(AAU, 2025-07-29) Ifa Deneke; Kelifa Srmolo
This study assessed the pastoralist household’s willingness to pay for index-based livestock insurance. The study used mixed research design. Data were collected from both secondary and primary sources. A multi-stage sampling technique was used to collect data from a cross- sectional survey of 200 pastoralist households in Moyale woreda. Data was collected using desk reviews, Key Informant Interview (KIIs), Focus Group Discussions (FGDs) and household survey. This study employed the Contingent Valuation Method (CVM) to determine the willingness to pay for the purchase of index-based livestock insurances. Data were analyzed by various descriptive statistics such as frequency distribution tables, graphs, charts, mean and standard deviations. Further logistic regression model was used to determine the factors that influence pastoralist household’s willingness to pay for IBLI. In addition, qualitative data were presented in a rephrased and verbatim form and were analyzed by content analysis and narratives of case studies. The study found that livestock is the main source of livelihood for Borana pastoralists. Livestock keeping is important economic activity and has vital role in the livelihoods of the population as a source of food, draft power and much needed cash income. Largest proportion (92.41%) of respondents indicated that cattle is the dominant livestock species in the study area. The study revealed that among the problems that create multi-hazard situations in pastoral areas, drought is ranked first, and index-based livestock insurance is one of the mechanisms to reduce the impacts of drought. The study revieled that, largest majority (89 %) were aware of the existing livestock insurance policy. The study found that largest proportion (91.5%) of the respondents purchased livestock insurance for cattle, while the remaining 7 %, 1.5 % purchased the insurance for shoats and camels respectively. Further, the study also found that the maximum insurance purchase for cattle is 760, while the maximum purchase for shoats and camels is 250 and 500 respectively. The mean purchase for cattle is 299. 68, while it is 125 for camel, 98.33 for goats, and 68.75 for sheep. Concerning the payout received, the maximum payout received during the previous payout is 43,100 birr and the mean payout is 15,420 birr. Moreover, the study found that, about 76 percent of the households had a positive willing to pay for different categories of livestock. The study found that the households WTP is influenced by age of households, family size, sex of household head, IBLI training, drought shock and received payout. It is concluded that, given the exposure to the recurrent droughts’ pastoralist households are more willing to pay for livestock insurance. Therefore, to increase the pastoral households’ willingness to pay for index-based livestock insurance NGOs, local and national government should work on improving the socioeconomic status of the pastoralist households, provisions of the continuous training on the adverse impact of drought shock and role of insurance
The Effectiveness of Internal Control System in Detecting and Preventing Fraud in the Case of Bank of Abyssinia
(AAU, 2024-06-25) Yordanos Tizazu; Takele Fufa
This study investigates the effectiveness of internal control systems in detecting and preventing fraud within Bank of Abyssinia, a leading private bank in Ethiopia. Drawing on an explanatory research design, the study employs quantitative methods to explore cause-and-effect relationships among key variables: control environment, risk assessment, control activities, information and communication, and monitoring. The research focuses on a target population of 273 permanent employees directly involved in internal control functions. Using convenience sampling, 162 respondents were selected, reflecting a sample size determined by Slovin's formula. Data was primarily collected through structured questionnaires utilizing Likert scales validated through content validity and tested for reliability using Cronbach's alpha coefficients. Statistical Package for the Social Sciences (SPSS) version 23.0 facilitated data analysis employing descriptive statistics, multiple regression analysis, and t-tests to examine relationships and validate the research model. The regression model reveals an R-squared value of 0.764, indicating that approximately 76.4% of the variability in fraud prevention and detection is explained by the independent variables. The adjusted R-squared value and standard error of the estimate of suggest good fit and relatively accurate predictions by the model. The analysis of variance (ANOVA) yields an F-statistic with a significance level of 0.000, confirming the overall significance of the regression model. Additionally, the Durbin-Watson statistic supports the independence of residuals. The findings highlight the significant impact of a robust control environment, effective communication, and comprehensive risk assessment on fraud detection and prevention. Control activities and monitoring were also identified as critical in mitigating fraud risks. The study underscores the importance of continuous improvement and adaptation in internal control practices to address evolving fraud threats effectively. Based on the results, the study recommends advocates implementing robust internal control systems at Bank of Abyssinia to effectively mitigate fraud risks. Recommendations include integrating stakeholder feedback, training for auditors and accountants, and proactive monitoring by boards of directors. Ongoing, independent evaluation of internal controls by the governing body and audit committee is crucial for transparency and accountability
Factors Affecting Profitability of Insurance Companies in Ethiopia
(AAU, 2025-07-16) Aron Asfaha; P. Laxmikantham
This study investigates the factors affecting the profitability of insurance companies in Ethiopia by employing a mixed research design that integrates both primary and secondary data sources. Primary data were collected through structured questionnaires and unstructured interviews, while secondary data were obtained from audited financial statements and reports from the National Bank of Ethiopia (NBE). A systematic random sampling technique was applied to select five insurance companies for analysis. Probit regression was used to assess binary outcomes from the primary data, and panel data regression was applied to evaluate the impact of internal and external variables on profitability. The Probit analysis revealed that educational qualification and technological adoption significantly enhance profitability, indicating the critical role of skilled personnel and digital tools in driving financial performance. However, property damage insurance related to large infrastructure projects was found to negatively impact profitability. Qualitative findings from interviews highlighted recurring challenges such as strict regulatory environments, limited consumer awareness, delayed premium payments, and volatile interest rates. Results from the panel data regression further confirmed that company size positively influences profitability, while high leverage and inflation exert a negative effect. Exchange rate fluctuations showed a modest positive impact. In conclusion, the study underscores the importance of investing in digital technologies, enhancing staff capabilities, and revising underwriting strategies to align with evolving economic and development contexts. It recommends that Ethiopian insurance firms strengthen outreach in rural areas and adopt more adaptive, risk-sensitive business models to improve overall profitability and sustainability.
Assessment of the Effectiveness of the Internal Control System in the Prevention of Fraud in Dashen Bank S.C.
(AAU, 2024-02-01) Daniel Beyene; Abebe Yitayew
The study assessed the effectiveness of the internal control system in preventing fraud at Dashen Bank. A descriptive research design was utilized, incorporating both qualitative and quantitative approaches. The research involved 193 employees working in various work units within the bank, including the risk and compliance office, internal audit offices, and branches located in Addis Ababa. The study found that internal control techniques implemented by the bank have been effective in preventing fraud. However, some gaps were identified in the bank's risk identification, assessment of fraud and other risks, and systems for responding to risks effectively. There were also deficiencies in responsibility rotation, employee recruitment and retention, communication with external parties, and the use of transaction monitoring technology. The study recommended that Dashen Bank enhance its risk identification strategy, improve risk assessment processes, adopt advanced technological solutions, establish rotation procedures, enhance recruitment practices, offer targeted development opportunities, prioritize employee retention, promote diversity and inclusion, and create a feedback-rich environment. By enhancing internal control systems and incorporating technological solutions, banks can effectively prevent fraud, build customer trust, and ensure stakeholder confidence. Key Words: Internal Control, Fraud Prevention and Internal Control Component
Assessment of the Effectiveness of the Internal Control System in the Prevention of Fraud in Dashen Bank S.C
(A.A.U, 2024-09-12) Daniel Beyene; Abebe Yitayew
The study assessed the effectiveness of the internal control system in preventing fraud at Dashen Bank. A descriptive research design was utilized, incorporating both qualitative and quantitative approaches. The research involved 193 employees working in various work units within the bank, including the risk and compliance office, internal audit offices, and branches located in Addis Ababa. The study found that internal control techniques implemented by the bank have been effective in preventing fraud. However, some gaps were identified in the bank's risk identification, assessment of fraud and other risks, and systems for responding to risks effectively. There were also deficiencies in responsibility rotation, employee recruitment and retention, communication with external parties, and the use of transaction monitoring technology. The study recommended that Dashen Bank enhance its risk identification strategy, improve risk assessment processes, adopt advanced technological solutions, establish rotation procedures, enhance recruitment practices, offer targeted development opportunities, prioritize employee retention, promote diversity and inclusion, and create a feedback-rich environment. By enhancing internal control systems and incorporating technological solutions, banks can effectively prevent fraud, build customer trust, and ensure stakeholder confidence. Key Words: Internal Control, Fraud Prevention and Internal Control Components
The Effects of Corporate Governance on the Quality of Financial Reporting: the case of some Selected Private Commercial Banks
(A.A.U, 2026-02-01) Genet Kefyalew; Takele Fufa
This paper examines how the procedures of corporate governance have effects on the financial reporting in the Ethiopian private commercial banks, namely, Bank of Abyssinia,Awash Bank, and Dashen Bank. The quantitative research methodology was used to collect primary data by way of administration of structured questionnaires to 136 members of the finance department leading to a response rate of 88 percent. The study has considered five key variables of governance, including audit committees, board size, board independence,disclosure transparency, and the frequency of the board meetings. The outcomes of the multiple regression analysis revealed that the factors that positively influence the quality of financial reporting are, in turn, audit committees (b = 0.359, p 0.001), board independence (b = 0.314, p 0.001) and disclosure transparency (b = 0.278, p = 0.003), which explain 78.9 percent of the changes in the quality of financial reporting (R2 = 0.789). On the other hand, the board size and meeting frequency did not have any significant impact (p 0.05),which means that the structural governance issues override the procedural ones. The model was tested on the basis of diagnostic assessments, and there were no violations of the conditions of regression. The findings underscore the importance of Ethiopian banks focusing on good audit control, true board independence, and enhanced transparency and not the token compliance. The recommendations include the need to have financial competence in audit committees, the improvement of the standard of independence, and the standard of disclosure that is tiered. This research contributes to the existing body on corporate governance in emerging markets by determining situation-dependent variables that affect the quality of financial reporting, which could be useful to regulators and bank management that may want to strengthen accountability and stakeholders confidence. Keywords Corporate governance, financial reporting quality, audit committees, board indep endence, Ethiopian banks.
Challenges and Prospects of Interest-Free Banking Services in Ethiopia: The Case of Hijra Bank
(A.A.U, 2025-06-12) Amina Abdella; Kelifa Srmolo
This study explores the challenges and prospects of interest-free banking services in Ethiopia, with a particular focus on Hijra Bank. Adopting a qualitative approach complemented by descriptive research design and mixed methods, data were collected from 384 respondents, including both bank employees and customers. The research utilized primary and secondary sources to examine the operational, regulatory, and financial dimensions of Islamic banking in the Hijra Bank. Findings reveal increasing public acceptance of Islamic banking, primarily driven by the growing demand for Sharia-compliant financial products and the sector’s potential to foster financial inclusion. However, the study identified several systemic challenges, including underdeveloped regulatory frameworks, limited skilled human capital, inadequate technological integration, and widespread public misunderstanding of Islamic finance principles. Secondary data analysis from 2022 to 2024 highlighted substantial growth for Hijra Bank across key performance indicators total assets, interest-free deposits, customer base, and profitability. The bank’s transition from net losses in 2022 to a net profit by 2024 reflects improved operational efficiency, strong public trust, and the rising viability of Islamic banking in Ethiopia. Despite early operational hurdles, the study concludes that the outlook for interest-free banking in Hijra Bank is optimistic. Realizing this potential will require concerted efforts in regulatory reform, workforce capacity building, digital transformation, financial product innovation, and enhanced public awareness. Strategic collaboration among policymakers, financial institutions, and community stakeholders is essential to foster sustainable growth and competitiveness in Ethiopia’s Islamic banking sector. Key words: Islamic banking, interest-free banking, Hijra Bank, Ethiopia
Re-Imaging Literacy as a Driver for Financial Inclusion in Ethiopia
(AAU, 2025-09-02) Abdella Hussen; Abbl M. Kedir
:: This study analyzes the multifaceted role of digital financial literacy (DFL) and financial literacy (FL) in advancing holistic financial inclusion within Ethiopia’s diverse socioeconomic heterogeneity. Drawing on nationally representative data from the Ethiopia socioeconomic survey (ESS), the research employs robust mixed-effects economic modeling to investigate how DFL and FL influence three interconnected areas of financial inclusion: interest-free banking (IFB), traditional financial services, and digital financial inclusion through mobile banking. The finding reveals that both DFL and FL are critical, statistically significant predictors of financial inclusion, with DFL exerting the strongest influences on the usage of IFB and digital financial services. The data insight analysis uncovers pronounced disparities in literacy and inclusion by region, gender, income, and religion, with rural, female, and low-income groups facing persistent barriers. Remarkably, the research demonstrates that enhancing DFL and FL not only increases the likelihood of adults using IFB and conventional financial services but also helps bridge the digital divide, particularly in mobile banking uptake. The study emphasizes the necessity of context-sensitive, dual-literacy interventions and the leveraging of community networks such as Equb and Idir to foster resilience and inclusion. Policy recommendations include the need for targeted literacy training and curriculum redesign, digital infrastructure expansion, and the tailoring of financial products to local values and needs with grassroots community-empowering economic systems. By integrating advanced econometrics techniques and focusing on Ethiopia’s socioeconomic disparities context, this deep data-driven research offers practical ecommendations to policymakers and practitioners seeking to solve financial exclusion and achieve realized true, robust, multidimensional inclusion. The dissertation synthesis concludes that closing Ethiopia’s financial inclusion gaps requires a holistic, strategic, innovative approach that combines literacy, technology, and adaptive policy, ensuring social justice and equitable access and usage for all segments of society. Keywords: Digital Financial Literacy, Financial Inclusion, Interest-Free Banking, Mobile Banking, Socioeconomic Disparity, Ethiopia
Dissertation Submitted in Partial Fulfilment of the Requirement for Doctor of Philosophy Degree in Accounting and Finance: Specialization in Finance
(AAU, 2026-01-01) Kidist Jiffar; Habtamu Berhanu
The financial system is essential for a healthy economy, transferring funds from surplus to deficit units. Banks, as the backbone, play a crucial role in this process, influencing economic growth and development. Proper financial regulations and oversight are necessary for an efficient and stable banking sector. However, research on the effect of financial regulation on banks' performance and stability, and comparisons across countries, are limited. Therefore, the objective of the study is to assess the effect of bank regulations on bank operational efficiency and financial stability, and to compare Ethiopian foreign bank entry regulations with those of other SSA countries. To conduct the analysis, the researcher uses panel data from 2000–2021 to better understand the policy effects. This study utilizes aggregate bank efficiency and stability data from the World Bank. Country-based banking aggregate Z–score and Cost-Income-Ratio are used to measure financial stability and efficiency of the banking sector, respectively. Variables such as foreign bank entry restrictions, banking activity restrictions, and strict capital regulation are selected to measure bank regulation across SSA. The data sources include the National Bank of Ethiopia, Global Financial Development Database, Bank Regulation and Supervision Survey, World Development Indicators Database, and Worldwide Governance Indicators database. A Random Effect Instrumental Variable (REIV) approach is used to analyze the relationship between foreign bank entry restrictions and bank efficiency; the Taylor-Hausman model assesses the effect of foreign bank entry restriction on bank stability; and Generalized Method of Moments (GMM) is applied to examine the relationship between banking activity restrictions, stringent capital regulation, and both bank efficiency and stability. The empirical findings of the paper are used by policymakers, regulators, and bank management. Specifically, the results help policymakers and regulators understand the effects and consequences of existing regulations on bank efficiency and stability, and provide insights into the outcomes of strict regulation. The Ethiopian banking industry has been unique in the sense that government owned banks dominate, the market is closed to foreign banks and there are strict regulations. This offers a good opportunity to perform a comparative analysis, contribute to the literature, and make policy recommendations. The findings show that restrictions on foreign bank entry have a significant negative effect on bank operational efficiency but a positive effect on bank stability; bank operational efficiency is negatively affected by restricted banking activities and stringent capital regulation; and bank stability is positively affected by restricted banking activities and negatively affected by strict capital regulation. The first policy recommendation is to liberalize foreign bank entry cautiously, relaxing banking activities and capital regulation. The public interest argument is also a very important tool. Swift liberalization in an imperfect market structure, underdeveloped financial system, and inadequate supervision can all lead to inefficiency and instability. Keywords: bank; regulation; entry restriction; activity restriction; capital regulation; efficiency; stability
Determinants of NonPerforming Loan in Private Commercial Banks in Ethiopia
(A,A,U, 2025-06-01) Abebe Genbaw; Sewale
This study aims to assess determinants of nonperforming loans. The mixed research approach was adopted for this study. A survey was conducted among professionals working in private commercial banks in Ethiopia, all of whom held various credit-related positions, using a selfadministered questionnaire.. This study has assessed the effectiveness of loan performance in terms of credit assessment; credit follow-up (monitoring), credit size, and collateral. The study used both primary and secondary data collection instruments, and 139 questionnaires were distributed to respondents. From these, 133 were returned in addition to that qualitative and quantitative research approach used. Stratified sampling methods were used, and the population into strata. After that, the researcher used a purposive sampling technique, and employees were selected. The researcher checked the reliability test, where the consistency of the questionnaire was evaluated over time by Cranach’s Alpha (using SPSS version 27) to analyze the data gathered. The data was analyzed using the explanatory research design to see the relationships and effects between determinants and non-performing loans. Correlation and regression analysis was also used to see the relationships and effects between determinants and onperforming. And data was analyzed using inferential statistics and Pearson correlation. The Pearson correlation analysis result indicates all relationships between the independent variables (credit assessment, credit follow-up (monitoring), credit size, and non-collateral loan) and the dependent variable (non-performing loans) were positively and significantly correlated. The finding of this study shows that loans are affected by inadequate credit assessments, rapid growth in credit size, poor risk evaluations, weak follow-up and monitoring of loans, insufficient credit analysis, and a lack of adequate collateral. The researcher suggests that banks should be establish a strong credit process involving careful customer selection, thorough credit assessment, proper loan approval, proactive monitoring, adequate collateral, and clear loan procedures and all loan processes should be implemented free from any interventions. Key words: credit assessment, credit follow up &monitoring, credit Size, collateral and NPL.
The Effect of Value Added Tax on Operational Efficiency of Ngos In Addis Ababa The Effect of Value Added Tax on Operational Efficiency of Ngos in Addis Ababa
(A.A.U, 2026-06-02) Yeshi Feyisa; Takele Fufa
This thesis research investigates the impact of Value Added Tax (VAT) implementation on the operational efficiency of Non-Governmental Organizations (NGOs) operating in Addis Ababa,Ethiopia. Utilizing a mixed-methods research design, the study analyzed primary data from a survey of 112 registered NGOs, representing a 100% response rate. The relationship between VAT-related variables and organizational performance was evaluated using a multiple linear regression model, which demonstrated that independent variables including compliance burden,refund timelines, and budget availability explain 62.4% of the variance in NGO operational efficiency. The empirical findings reveal that the current VAT framework creates a significant structural drain on the non-profit sector. Quantitatively, 81.3% of the surveyed NGOs perceive VAT as a moderate to very strong constraint on their operations. A critical factor in this inefficiency is the systemic delay in the tax recovery process; 80.4% of respondents reported waiting more than seven months for VAT refunds, with 37.5% of the sample experiencing delays exceeding one year. These protracted timelines result in severe liquidity constraints, forcing 73% of organizations to resort to emergency borrowing and causing project execution delays for 78% of the NGOs.Furthermore, the study identifies a direct erosion of developmental resources, with 72% of NGOs reporting a reduction in program scope or beneficiary reach due to unrecoverable VAT costs. The administrative compliance burden is equally taxing, as 68% of organizations dedicate 15 to 30 staff hours monthly exclusively to VAT-related ocumentation and follow-up.The research concludes that the current system undermines the principle of tax neutrality for the non-profit sector. To mitigate these challenges, the study recommends that the Ministry of Revenues (MoR) prioritize the automation of refund mechanisms and streamline exemption procedures to ensure that donor-funded resources are maximized for social impact.Keywords: NGO, VAT Refund, Timeline, Budget, Compliance burden, Program and Administrative Costs
The Effect of Capital Structure on Financial Performance in Small and Medium Enterprises in the Dairy Sector in Addis Ababa
(A.A.U, 2026-02-02) Aemiro Mengistu; Sewale Abate
This study aims to examine the effect of capital structure decisions on the financial performance on small and medium enterprise in diary sector in Addis Ababa user. The primary objective is to analyze the effect of long-term debt to equity ratio on profitability, as measured by Return on Assets (ROA), while considering other variables such as firm size, asset size, sales growth, firm age, and inflation rate. Using secondary panel data from the audited financial statements of 14 small and medium enterprise in diary sector in Addis Ababa for the period 2015-2024, the study employs regression analysis using Fixed Effect model to investigate these relationships. The findings reveal that capital structure, particularly higher long-term debt to equity ratio also having a statistically significant and negative relationship with return on asset .this is because of the excessive costs associated with debt .additionally asset size and age of firms having statically significant and negative relationships with return on asset. In contrast, some variables, such as firm size and sales growth shows positive effects on performance. Based on these results, the study recommends that financial managers in the small and medium enterprise in diary sector carefully balance their debt and equity financing by reducing their debt to optimize profitability. Additionally, it suggests that firms should consider the specific economic and industry context when making capital structure decisions, as the effects can vary significantly across different environments. Keywords: Capital Structure, Financial Performance, Dairy Sector, Profitability, Debt ratio
Assessment of the Effectiveness of the Internal Control System in the Prevention of Fraud in Dashen Bank S.C
(A.A.U, 2024-02-02) Daniel Beyene; Abebe Yitayew; Dayito Alemu
The study assessed the effectiveness of the internal control system in preventing fraud at Dashen Bank. A descriptive research design was utilized, incorporating both qualitative and quantitative approaches. The research involved 193 employees working in various work units within the bank, including the risk and compliance office, internal audit offices, and branches located in Addis Ababa. The study found that internal control techniques implemented by the bank have been effective in preventing fraud. However, some gaps were identified in the bank's risk identification, assessment of fraud and other risks, and systems for responding to risks effectively. There were also deficiencies in responsibility rotation, employee recruitment and retention, communication with external parties, and the use of transaction monitoring technology. The study recommended that Dashen Bank enhance its risk identification strategy, improve risk assessment processes, adopt advanced technological solutions, establish rotation procedures, enhance recruitment practices, offer targeted development opportunities, prioritize employee retention, promote diversity and inclusion, and create a feedback-rich environment. By enhancing internal control systems and incorporating technological solutions, banks can effectively prevent fraud, build customer trust, and ensure stakeholder confidence. Key Words: Internal Control, Fraud Prevention and Internal Control Components
The Effect of Corporate Governance on the Independence of Internal Audit Function in Private Commercial Banks in Addis Ababa
(A.A.U, 2025-11-09) Dina Belete; Takele Fufa; Takele Fufa
This study aimed to investigate how various Corporate Governance factors influence the through 117 structured questionnaires distributed among bank management and 10 interview questions directed at the management of six banks, alongside responses from 111 bankers, specifically internal audit department managers. Ultimately, 111 completed questionnaires were obtained from key participants, including Internal Audit managers, heads of inspections, and audit division officers. Utilizing a census approach, the research surveyed the entire target population of Internal Audit managers, heads of inspection, and risk managers from the six selected private commercial banks in Ethiopia, comprising a total of 127 respondents. This method effectively reduced sampling error by encompassing all relevant individuals, thereby ensuring a thorough collection of data regarding the influence of Corporate Governance on Internal Audit independence. The structured questionnaires employed a five-point Likert scale, which provided detailed insights and enhanced the reliability and validity of the results. Data analysis was conducted using The SPSS version 25 statistical software. A regression model was applied to examine the relationship between The Internal Audit function and the level of Corporate Governance factors, with a significance test conducted at a 95% confidence level. The findings indicated a positive linear relationship between the independence of The Internal Audit function and several Corporate Governance factors: Corporate Governance setting (CGS), senior management support (SMS), effectiveness of the audit committee (EAC), impact of the remuneration and nomination committee (ERNC), influence of technological advancement (ETA), and stakeholder engagement (SA) concerning Internal Audit staff within private commercial banks in Addis Ababa, Ethiopia. Based on These findings, The study recommends Corporate Governance factors on the independence of Their audit functions. Additionally, it is advised that These departments stay updated on The Corporate Governance elements that affect Their independence to maximize The value-added services provided by Their Internal Audit functions. KEY WORDS: Corporate Governance, senior management, independence, Internal Audit,Remuneration & Nomination committee, audit committee effectiveness, Technological advancement Stakeholder’s engagement, Internal Audit staffthat The Internal Audit departments of private banks pay attention to the implications of
ANassessment of Internal Auditing Practices And Its Challenges In The Case of Bole Sub City Administrationn
(A.A.U, 2026-01-09) Aklilu Kinfe; Sewale Abate; Lemessa Bayissa
Internal auditing has a vital role to assist members of the organization effective discharge of their responsibilities. The purpose of this research is to examine internal audit practices and to find out the related challenges in Bole Sub-city Administration Internal Audit Sub process. For describing a given problem both open-ended and close-ended questionnaires were distributed for all internal audit process owners, senior auditors and finance core process owners of the sub city and districts. Also, unstructured interview is undertaken with sub city’s top manager. The collected data analyzed in quantitative and qualitative techniques. The main findings drawn from this; lack of manpower, less emphasis for training, inadequate internal control evaluation,lack of preparation of the plan based on internal audit professional standards, lack of fully independence, lack of successful audit results. From this the researchers concluded that there is gap in the internal audit practice of the sub city. This study recommends that the sub city required to fulfill the required manpower to meet its objectives as desired; internal audit sub process should report and comment on the effectiveness of internal control system and suggest ways and means to improve these systems; internal audit should prepare its strategic, annual and individual plan based on IIA standards, top management and internal audit work together in order to improve independence; management should use the outcome of internal audit to make the sub city more productive. Key words – internal auditing, internal audit professional standards, Independence,
The Impact of Fintech on Financial Performance of Banks in Ethiopia, the Case of Selected Commercial Banks
(A.A.U, 2025-05-20) Gizachew Tefera; Abebe Y.
This study explores the impact of fintech adoption on the financial performance of selected Ethiopian commercial banks, focusing on profitability, operational efficiency, customer satisfaction, competitiveness, loyalty, and risk management. Based on financial and customer data from five medium-sized banks between 2019 and 2024, the findings reveal that internet banking adoption has the strongest positive effect on profitability (ROA and ROE), while mobile banking significantly expands customer reach and engagement, though it incurs short-term implementation costs. Operational efficiency improved modestly due to streamlined processes, reflected in a moderate reduction in the cost-to-income ratio. Fintech also enhanced customer satisfaction through improved accessibility and convenience, leading to stronger customer loyalty and retention. Market competitiveness showed slight gains, particularly among digitally active banks leveraging fintech for broader outreach. Importantly, fintech adoption improved risk management by supporting fraud detection, enhancing credit risk profiling, and enabling real-time data analysis. These results suggest that strategic fintech integration can significantly strengthen the financial and operational performance of banks in emerging markets like Ethiopia. Keywords: Fintech, financial performance, commercial banks, Ethiopia, mobile banking, internet banking, digital payments, financial inclusion.
Assessment of Factors Affecting the Development of Capital Market in Ethiopia
(A.A.U, 2025-06-18) Addis Molla; Temesgen Work
This study focused on the challenges affecting the development of the capital market in Ethiopia in line with its prospects for investors and government for economic development aiming to describe possible challenges related to the development and efficient operation of the market. The study applied a descriptive research design with qualitative data analysis method based on the data collected trough structured questionnaire from key participants like; National bank of Ethiopia, Ministry of Finance and Economic Commissions, Commercial banks board of directors, Insurance companies, Investors and other professionals. The study reveals that the effect of level of awareness, lack of adequate regulatory system, inflation, infrastructure and development of financial institutions, investors' business culture, and government privatization policy are the major challenging factors for the development of Capital market in Ethiopia. The study also forwarded recommendations like taking initiatives and cascading the responsibility of capital market development for different financial institutions. Furthermore, laws and regulations, technological infrastructure, and capacity of financial and non-financial institutions should be evaluated and provide support. Generally, government should accept financial support from different professionals and organizations either it be local or international, as long as the interest of the country is secured. Key Words: capital market, development, infrastructure, financial institutions, GDP.
Efficiency-Risk Interplay in Banking: Theoretical Insights and Empirical Evidence from Ethiopia
(AAU, 2025-09-25) Daniel Tolesa Agama; Shihong Li
Efficiency-Risk Interplay in Banking: Theoretical Insights and Empirical Evidence from Ethiopia Daniel Tolesa Agama PhD Dissertation Addis Ababa University (2025)This study examines the interplay between technical efficiency and risk in 17 Ethiopian commercial banks over 2014–2022. Technical efficiency is measured using bias-corrected Data Envelopment Analysis under the Charnes–Cooper–Rhodes (CCR) constant returns to scale and Banker–Charnes–Cooper (BCC) variable returns to scale specifications. Efficiency differences by ownership and size are compared via Mann–Whitney U tests.Dynamic panel estimations—Difference Generalized Method of Moments and fixed-effects models—assess (a) the effects of credit risk and liquidity risk on efficiency, and (b) the effects of efficiency on subsequent credit and liquidity risks. Profitability (return on average assets), capital adequacy ratio, and bank size are included as additional efficiency determinants. Findings indicate that higher credit and liquidity risks significantly increase technical efficiency, while greater efficiency leads to elevated subsequent credit and liquidity risks. Profitability positively affects efficiency; capital adequacy has no significant effect; and larger banks exhibit slightly lower efficiency. Public banks underperform private peers in overall and scale efficiency yet exceed them in pure technical efficiency. These results support Financial Intermediation Theory and the Skimping and Moral Hazard hypotheses and reject the Bad Management hypothesis for public banks. Banks should integrate robust risk controls with efficiency initiatives, and regulators should consider these interplay effects when formulating policies

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