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Item Determinants of Mobile Money Growth: The case of Five Selected East African Countries(Addis Ababa University, 2025-09) Abay Gebeyaw; Mengistu Bogale (PhD)In East Africa, mobile money has emerged as a key driver of financial inclusion, enabling individuals without bank accounts to access essential financial services. This study examines the factors that influence the growth of mobile money account in five chosen East African nations, with a particular emphasis on network coverage, mobile device ownership, banking penetration, regulatory policies, and mobile money agents. Utilizing a quantitative research methodology, the study analyzes the connections between independent factors and the rise of mobile money using multiple linear regression analysis in SPSS and secondary data from 2019 to 2023. The result indicates that the availability of mobile money agents, the banking penetration, network coverage, and the percentage of mobile devices ownership all have a positive influence on the number of registered mobile money accounts. The study does discover, however, that the Mobile Money Regulation Index (MMRI) has a notable adverse effect, indicating that too strict rules can prevent uptake. These results emphasize how crucial it is to maintain regulatory framework balance in order to promote innovation and safeguard consumers. The study suggests that governments use flexible regulatory strategies that promote the use of mobile money while upholding security requirements in light of the findings. To increase accessibility, mobile money service providers could use technology infrastructure and grow their agent networks. Future studies should look at consumer behavior while using mobile money in various economic circumstances and investigate the precise elements of regulatory rules that influence its uptake.Item The Impact of Foreign Currency Reserve on Ethiopian Manufacturing Sector Performance(Addis Ababa University, 2025-08) Abrham Geremew; Tenkir Seifu (PhD)This study investigates the impact of foreign currency reserves on Ethiopia’s manufacturing sector performance from 1984 to 2023. It follows a quantitative research approach and adopts an explanatory design to assess causal relationships. A comprehensive time-series dataset from the World Bank and the National Bank of Ethiopia is analyzed using the Autoregressive Distributed Lag (ARDL) model to capture both long- and short-term dynamics between foreign currency reserves and manufacturing value-added. Key findings reveal that stable foreign reserves significantly enhance manufacturing output in the long run, while short-term volatility in reserves has contractionary effects. Inflation is identified as a major long-term obstacle to manufacturing growth, despite temporary positive effects in the short term. Additionally, the relationship between foreign direct investment (FDI) and manufacturing output is positive but weak, whereas imports show no statistically significant impact. The study suggests that policymakers focus on building optimal reserve levels and mitigating inflationary pressures to foster a resilient and competitive manufacturing sector in Ethiopia.Item The Effect of Automated Teller Machines on the Financial Performance of Selected Commercial Banks in Ethiopia(Addis Ababa University, 2025-08) Admasu Shegie; Mengistu Bogale (PhD)The study examines the relationship between ATM deployment, number of ATM users, investment on ATM technology, charges on ATM usage, volume of transaction through ATM and financial performance indicators of commercial banks. Using financial reports and internal reports of commercial banks panel data from 2015-2024 and regression analysis, the researcher investigates impact of ATM deployment, number of ATM users, investment on ATM technology, charges on ATM usage, volume of transaction through ATM on financial performance of commercial banks in Ethiopia. As per the study the researcher finds out charge on ATM usage (commission income) significantly affects the return on asset (ROA) negatively and return on equity (ROE) is positively and significantly impacted by investment on ATM and also impacted positively by volume of transaction. The study adds empirical support for ATM network optimization to the body of knowledge on banking technology efficiency. To match ATM operations with profitability targets, practical suggestions include cost reduction and strategic ATM placement.Item Factors Affecting the Adoption of Financial Technologies in The Banking Industry of Ethiopia(Addis Ababa University, 2025-09) Akalu Atlaw; Berhanu Beza (PhD)The objective of this study is to identify the factors that influence the adoption of financial technologies in commercial banks in Ethiopia. The research has considered five major factors as explanatory variables of the adoption of financial technologies. These explanatory variables are perceived usefulness, security risk consideration, performance expectancy, facilitating condition, and financial technology regulations. As there has not been sufficient research conducted on the topic of the study in Ethiopian financial institutions in general and in commercial banks in particular, the researcher has conducted the study. A quantitative research approach was followed to determine the factors that affect technology adoption in commercial banks. Specifically, an explanatory design was employed to address the objectives of the study, and the timeframe of the study covers examining existing situations using cross-sectional data. Pertinent and adequate data were extracted from both primary and secondary data sources. Since the number of the target population was small, census methods were followed to collect data. The study has considered all of the 31 commercial banks, and pertinent data were gathered accordingly from all respondents. Questionnaire and document analysis techniques have been used to solicit information from respondents and documents. Both descriptive and inferential statistical analyses were used to analyze the data. SPSS version 27 software was used to conduct the statistical tests. The results of the research indicate that all of the explanatory variables considered in the model have a significant positive effect on the adoption of financial technologies in commercial banks in Ethiopia. The effect analysis shows that the model summary of the regression analysis has significant explanatory power with R square and adjusted R square of .926 and .911, respectively. The ANOVA test result of the study indicates that the model is fit to determine the cause-effect association relationship between the explanatory variables and the dependent variable. Specifically, perceived usefulness of the technology had the highest significant effects, while perceived security risk consideration had the least significant effect on the adoption of financial technologies. Finally, the study recommends that commercial banks be required to conduct an adequate assessment of the potential security risk of technologies before adopting the technology. Commercial banks are required to provide adequate and timely training for their employees about financial technologies and their use. Financial regulations are also expected to further improve the adoption of financial technologies in the banking industry.Item Impact of Dividend Payout Ratios and Dividend per Share on ROE: Panel Evidence from Ethiopian private banks (2005 – 2024)(Addis Ababa University, 2025-09) Ananiya Seyoum; Meshesha Demie (PhD)The research evaluates how Dividend Payout Ratio (DPR) and Dividend per Share (DPS) affect private commercial bank performance in Ethiopia during the period from 2005 to 2024. The research addresses financial stability concerns through an unbalanced panel dataset of 10 banks using GLS regression and random-effects models. The research demonstrates a direct negative relationship between DPR and ROE which shows that high dividend payments reduce reinvestment capital thus decreasing profitability. The signaling theory receives support from DPS's consistent positive influence on profitability metrics. The study shows that GDP growth strengthens bank performance but inflation produces only small effects. The research findings demonstrate that Ethiopian banks need to develop strategic dividend management approaches to achieve better performance and reduce financial risks. Banks should maintain a DPR between 30% and 50% to achieve shareholder returns and retained earnings balance while using stable DPS as a signaling tool to boost investor confidence and maintain a leverage ratio between 3:1 to 4:1 for optimal capital management. Banks need to perform regular assessments of their dividend and leverage strategies while maintaining open communication with stakeholders to ensure their policies match stakeholder expectations and economic conditions. The research provides essential guidance to bank regulators and policymakers for promoting sustainable growth in the Ethiopian banking sectoItem Key Drivers of Liquidity Risk in The Banking Industry of Ethiopia(2025-10) Anbessa Abebe; Meshesha Demie (PhD)This study investigates the key drivers of liquidity risk in the Ethiopian banking industry, using bank-specific and macroeconomic factors. Using panel data from 17 commercial banks over the period 2000–2023, the research employs a fixed effects model to analyze the determinants of liquidity risk, measured by the liquidity ratio (LR). Bank-specific factors such as bank size (BS), capital adequacy ratio (CAR), asset quality (AQ), and loan-to-deposit ratio (LDR) are examined alongside macroeconomic variables, including GDP growth rate (GDPR), inflation rate (INFR), and interest rate spread (INTR). The findings of the study revealed that Lagged LR and capital adequacy have a significant positive impact on liquidity. Conversely, the loan-to-deposit ratio shows a Significance negative relationship with liquidity. Macroeconomic factors such as GDP growth and inflation have negative and insignificance influences on liquidity, while interest rate spreads has positive and significant impact on liquidity. The research concluded that both bank specific and macroeconomic factors have impact on the liquidity of banks. Thus, the researcher recommended that commercial banks and policymakers need to ensure prudent lending practices, regulatory oversight, and macroeconomic stability to mitigate liquidity risks. This study contributes to the existing literature by providing a comprehensive analysis on the determinants of liquidity risk in a developing economy, offering valuable insights for academicians, practitioners, and policymakers.Item Assessment of Operational Functions of the Ethiopian Deposit Insurance Fund(Addis Ababa University, 2025-09) Mekdes Gizaw; Dakito Alemu (PhD)This study is done for assessment of Operational Functions of the Ethiopian Deposit Insurance Fund which was established in 2023 to strengthen financial stability and protect depositors. By Focusing on four core functions of the fund—premium setting mechanism, fund management, fund sufficiency, and public awareness—the research employed a quantitative research approach by collecting data via structured questionnaires from 80 banking, microfinance, and EDIF professionals in Addis Ababa and an interview was done with one of EDIF Director. The researcher used descriptive and narrative analysis methods to analyze the data collected. The results of the descriptive analysis reveals moderate confidence in EDIF’s premium setting mechanism with mean score: 3.24, though concerns persist about its capacity to discourage risky bank behavior. Fund management practices (mean: 3.12) are viewed carefully, with transparency and governance independence flagged for improvement. Fund sufficiency (mean: 3.08) faces skepticism regarding adequacy for crisis response. Critically, public awareness (mean: 3.15) is underdeveloped, with weak communication on coverage limits (mean: 2.47) undermining trust. As per the interview with one of the directors, the EDIF has involved in its operations since its establishment, elaborated why it has employed flat rate of premium settings. Points out its strengths and weaknesses and has planned to by a pay box plus role in the near future to protect the financial sector of the economy and take part in the developing the country’s economy. The study concludes that while EDIF aligns broadly with its mandate, strategic enhancements in risk-based premiums, governance transparency, crisis funding strategies, and public outreach are imperative to strengthen its role in Ethiopia’s financial sector safety. Recommendations include adopting dynamic premium models, proactive disclosure protocols, and nationwide awarenessItem Factors affecting the financial performance of manufacturing companies in Ethiopia The Case of Selected Manufacturing, Ethiopia(Addis Ababa University, 2025-06) Meron Kebede; Dakito Alemu (PhD)The manufacturing industry in Ethiopia is currently underdeveloped, contributing only 11.7% to the country's Gross Domestic Product (GDP). The objective of this study was to investigate the various factors affecting manufacturing companies in Ethiopia. To achieve this, the study utilized panel data collected from selected manufacturing firms over the period of 2019 to 2023. A combination of descriptive and explanatory research designs was employed. Secondary data were sourced from the Ethiopian Revenue Customs Authority's large taxpayer branch office, ensuring the reliability and accuracy of the data used in the analysis. To analyze the data, the study utilized panel data regression and Spearman correlation to test the relationships and effects of independent variables on dependent variables. The study's findings reveal several significant relationships: The analysis indicated a significant negative relationship between leverage and financial performance, specifically measured by Return on Assets (ROA). This finding suggests that as leverage increases, the return on assets tends to decrease, consistent with the pecking order theory. This theory suggests that firms prefer internal financing over external financing and that higher debt levels can be unfavorable to financial performance due to increased costs and financial risk. In contrast, liquidity demonstrated a significant positive relationship with ROA. This indicates that companies that effectively manage their liquid assets can enhance their financial performance, capitalizing on investment opportunities and maintaining operational flexibility. Additionally, the analysis revealed that firm size and age had a negative relationship with ROA. In conclusion, the study recommends that manufacturing companies focus on optimizing liquidity to effectively capitalize on investment opportunities and manage their operationsItem Research on Effect of Adopting Financial Technology on The Operational Efficiency of Ethiopian Banking Service A Case Study on Selected Commercial Banks(Addis Ababa University, 2025-02) Meron Mindaye; Tenkir Seifu (PhD)This study investigates the impact of financial technology (Fin-tech) adoption on the operational efficiency of Ethiopian banking services, focusing on selected commercial banks. The research examines key dimensions of Fin-tech adoption, including technological integration, cost efficiency, process automation, and customer experience. Employing a quantitative approach, data was collected from bank employees using structured questionnaires and analyzed through statistical methods such as correlation and multiple regression analysis.Findings reveal that technological adoption has the most substantial influence on operational efficiency, with 85.5% of respondents acknowledging improvements in transaction processing, risk management, and workflow productivity. Additionally, 83.4% of participants reported significant reductions in operational costs due to Fin-tech-driven automation. Process automation enhances transaction speed and accuracy, as confirmed by 84.5% of respondents, leading to a 40% increase in employee productivity. Moreover, Fin-tech solutions significantly enhance customer experience, with 87.1% of respondents indicating improved service accessibility and efficiency.Despite the numerous benefits, challenges remain, including regulatory constraints, cybersecurity risks, and digital literacy gaps among employees and customers. To maximize Fin-tech’s impact, the study recommends comprehensive technological integration, investment in digital infrastructure, workforce training, and supportive regulatory frameworks. Future research should explore the long-term effects of Fin-tech adoption and the role of emerging technologies like blockchain and artificial intelligence in further transforming the banking sector.Item Financial Literacy and The Intention To Participate In the Emerging Ethiopian Capital Market: A Study of Potential Investors(Addis Ababa University, 2025-08) Mesere tNigatu; Tenkire Seyfu(PhD)The general objective’ of this research is to explore investors' financial literacy and their participation in the Ethiopian capital market. Explanatory research design and mixed of quantitative and qualitative are employed. Through judgmental sampling of 384 respondents are participated. The study revealed that respondents possess a high level of financial knowledge, particularly in calculating interest and understanding investment diversification. While they expressed strong confidence in making personal investment decisions, there was limited interest in exploring new financial products. Access to financial information was generally high, with most respondents finding it easy to understand. Capital market participation potential was also strong, with many feeling knowledgeable and ready to invest. Regression analysis confirmed that financial knowledge, attitude, and access to information all significantly and positively influence participation potential, with financial knowledge showing the strongest effect. These findings highlight the critical role of financial literacy in promoting active engagement in Ethiopia’s emerging capital market.Item Determinants of Bank Liquidity Risk; Evidence From Commercial Banks in Ethiopia(Addis Ababa University, 2025-08) Mihiret Yohannes; Tenkire Seyfu (PhD)This study analyzes the macroeconomic and bank-specific factors influencing commercial banks' liquidity risk in Ethiopia between 2015 and 2024. Using annual regression analysis and panel data techniques—excluding and including fixed effects, random effects, and dynamic panel models—the study tests the influence of such variables as growth in loans, net interest income, capital adequacy, operational inefficiency, inflation rate, and GDP growth on banks' liquidity. The results pinpoint loan expansion as the most consistent and statistically significant determinant of liquidity, with coefficients ranging from 0.0305 to 0.0612 between models, implying that expanding portfolios of loans has a tendency to enhance liquidity. Inflation also positively but less robustly affects liquidity, with significance largely in dynamic models. The rest of the variables, including capital adequacy, net interest margin, operational inefficiency, and growth in GDP, had minimal or statistically zero effects on liquidity risk. Fit measures of the model, particularly during 2021–2024, indicate stronger explanatory ability, suggesting changing economic conditions or better sufficient alignment of financial metrics with liquidity behavior. The research discovers that prudent loan portfolio growth and prudent inflation tracking would be what effective liquidity risk management of the Ethiopian commercial banks would need, as a substitute to overreliance on traditional macroeconomic or balance sheet indicatorItem Assessing The Effects of Floating Exchange Rate Regimes on Investment in Ethiopia(Addis Ababa University, 2025-09) Milliyon Legesse; Mengistu Bogale (PhD)This research examines the effects of Ethiopia's transition to a floating exchange rate system in July 2024 on investment trends. A mixed-methods design integrates macroeconomic statistics from the NBE, IMF, and World Bank with sectoral data from the Ethiopian Investment Commission, supplemented by qualitative stakeholder perspectives. Foreign direct investment increased by 13.2% year-on-year, with EIC data indicating significant inflows into agro-processing and textiles, rising by 21.5% and 18.7%, respectively. Conversely, domestic investment contracted, as gross fixed capital formation decreased from 7.6% to 2.8%, influenced by increasing input expenses and exchange rate instability. Imported inflation reached a maximum of 31.8%, disproportionately impacting SMEs and import-reliant industries. The study suggests that in the absence of hedging mechanisms or focused policy interventions, Ethiopia's liberalized system may not achieve consistent, widespread investment benefitsItem Assessment of Internal Control Effectiveness of Commercial Banks in Ethiopia(Addis Ababa University, 2025-08) Moa Kedida; Dakito Alemu (PhD)This study assesses of the internal control in Ethiopian commercial banks, emphasizing their role in ensuring financial sustainability. Focusing on 10 out of 30 banks categorized by size, the research employed a descriptive design and collected primary data via questionnaires from 226 staff (91% response rate) across key departments, analyzed using SPSS version 27. Findings revealed that while internal controls aligned with the COSO Framework were generally effective, effectiveness varied among banks, offering insights for improvement in enhancing overall effectiveness of internal control due to the nature of the riskiness of the banking sectors and its impact on financial performance.Item Operational and Strategic Readiness of Ethiopian Commercial Banks for The Emerging Capital Market: A Multi-Dimensional Assessment(Addis Ababa University, 2025-09) Moges Abera; Dakito Alemu (PhD)Globally, commercial banks play a crucial role in capital markets by offering asset management, structured finance, and leveraging digital and fintech innovations. In Africa, countries like South Africa, Nigeria, and Kenya have seen active bank participation in capital markets despite challenges such as regulatory uncertainties and market volatility. In Ethiopia, the enactment of the Ethiopian Capital Market Proclamation No. 1248/2021 marked a significant milestone in Ethiopia's financial landscape, setting the stage for a robust capital market that can drive economic growth by attracting investments and enhancing market efficiency. The readiness of commercial banks is vital for the success of the emerging capital market. This study examines the operational and strategic readiness of Ethiopian commercial banks, focusing on senior managers' perceptions, competitive strategies, capital adequacy, workforce capabilities, and leadership. A mixed-methods approach was employed, integrating qualitative insights with quantitative data for a comprehensive analysis. The findings reveal that while Ethiopian banks are optimistic about the potential of the capital market, their readiness is moderate due to gaps in strategic planning, risk management, and workforce skills. Competitive strengths such as partnerships and innovation are evident, but weaknesses in pricing strategies and digital infrastructure limit effectiveness. The study recommends targeted training programs, improved risk management frameworks, investment in technology, and leadership development initiatives to enhance banks' preparedness. By addressing these gaps, Ethiopian banks can play a pivotal role in the success of the capital market, contributing significantly to the country's economic development and financial integrationItem Initial Public Offering (Ipo) Readiness in Ethiopia: Assessing Regulatory Framework, Corporate Governance, Financial Literacy & Technological Challenges(Addis Ababa University, 2025-08) Mohammed Ahmed; Dakito Alemu (PhD)This study investigates the IPO (Initial Public Offering) readiness of companies in Ethiopia, focusing on the regulatory framework, corporate governance practices, financial literacy levels, and technological barriers that may impact their ability to successfully undertake an IPO. Employing a mixed-methods approach, the research combines quantitative data collected through questionnaires and analyzed using descriptive statistics (frequency distributions, percentages, means, and standard deviations) in SPSS 20, with qualitative data gathered from semi-structured interviews. The target population comprises Chief Finance Officers (CFOs), Chief Executive Officers (CEOs), General Managers, Deputy General Managers, Finance Managers, and Chief Accountants from selected large taxpayer share companies and private limited companies within the manufacturing, banking, and insurance sectors in Ethiopia. A stratified random sampling technique, using Yamane's formula, was used to determine a sample size of 129 respondents. Primary data was collected through questionnaires with both open and closed-ended questions, and face-to-face interviews. Secondary data was obtained from sources such as the National Bank of Ethiopia, the Capital Market Authority, academic journals, and relevant financial proclamations and policies. The result of this study revealed the lack of compliance with international IPO standards, insufficient transparency in financial discloser, weak investor protection mechanisms, lack of independent oversight on board of directors, limited understanding of investment process among potential investors, insufficient education on risk and benefit of IPOs, lack of integration between technological platforms used in the IPO process, cyber security concerns that jeopardize sensitive information. The study recommended regulatory reform, enhancing corporate governance, improving financial literacy, addressing technological barrier and strengthening the IPO ecosystem. The research contributes to the understanding of factors influencing IPO decisions in emerging economies and provides practical guidance for companies considering going public in EthiopiaItem Impact of Partnership Attributes on Audit Quality: Evidence from Private Audit Firms in Addis Ababa(Addis Ababa University, 2025-09) Nardos Worku; Dakito Alemu (PhD)This study examines how partner rotation, industry specialization, competence, and workload management influence audit quality in private audit firms in Addis Ababa, Ethiopia. Motivated by conflicting global evidence, limited empirical research in the Ethiopian context and Ethiopia’s ongoing efforts to establish a capital market which demands for high-quality, transparent financial reporting, this study responds to concerns about audit quality in a profession dominated by sole practitioners, who often face limited resources, expertise, and peer review opportunities. The study adopted a descriptive explanatory survey research design and quantitative research approach. A total of 122 questionnaires were distributed to audit partners, principals, and managers using random sampling from the 176 private certified firms registered in Addis Ababa, yielding 110 usable responses. Data were collected using a structured Likert-scale questionnaire and analyzed through descriptive statistics, Pearson correlation statistics, and multiple regression analysis. Regression analysis revealed that partner workload management had the strongest impact, followed by partner rotation and industry specialization. Although partners' competence showed a positive coefficient, it was not statistically significant. The model’s R² indicates that significant portion of the variance in audit quality was explained by the predictors. The findings underscore the importance of structural practices in audit firms, especially managing partner workloads, promoting rotation and industry specialization, to enhance audit quality. While competence remains relevant, it appears to require reinforcement from other factors. This research contributes to audit quality literature and offers practical recommendations for improving audit standards in Ethiopia’s evolving regulatory environment.Item Comparing Credit risk Determinants: Interest free banks VS Conventional Banks in Ethiopia(Addis Ababa University, 2025-08) Anwar Nurhsien; Tenkir Seifu (PhD)This study utilized secondary panel data collected from 80–100% of Ethiopian conventional and Interest free banks, analyzed using a fixed effects regression model in E-Views, guided by the Hausman test results. The research aimed to compare the determinants of credit risk (measured as Non-Performing Loans, or NPL) for both conventional and Interest free banks in Ethiopia. Based on empirical and theoretical reviews, it was hypothesized that NPL would exhibit: Positive significant relationships with real interest rate and credit growth rate. Negative significant relationships with GDP growth rate, capital adequacy ratio, net interest margin, income diversification, and return on assets. No significant relationship with bank size and market concentration ratio, for both banking models. Key findings: For conventional banks, the credit growth rate had a positive significant relationship with NPL. Conversely, return on assets, net interest margin, GDP growth rate, and bank size exhibited negative significant relationships. The market concentration ratio showed no significant relationship with NPL, confirming expectations. However, variables such as real interest rate, capital adequacy ratio, and income diversification unexpectedly lacked significant relationships with NPL. For Interest free banks, real interest rate and capital adequacy ratio showed positive significant relationships, while bank size had a negative significant relationship with NPL. As anticipated, the market concentration ratio demonstrated no significant relationship. However, other variables, including GDP growth rate, credit growth rate, net interest margin, income diversification, and return on assets, did not display significant relationships with NPL, contrary to initial expectations. These results highlight both similarities and differences in the determinants of credit risk for Interest free and conventional banks. Variations can be attributed to differences in economic environments, banking practices, and regulatory frameworks. The findings offer valuable insights for policymakers to consider when designing policies and regulations for the banking sector.Item Determinants of Agricultural Loan by Commercial Banks in Ethiopia: A Case of Three Selected Commercial Banks(Addis Ababa University, 2025-10) Ayenew Negusse; Dakito Alemu (PhD)This study examines the key factors influencing agricultural lending by commercial banks in Ethiopia, a sector vital to the economy yet underserved financially. Using survey data from credit officers and analysts, it analyzes seven dimensions—ranging from bank-specific and borrower-specific factors to broader economic, regulatory, and environmental conditions—through multiple linear regression. The findings show that bank-specific factors, risk assessment and management, political and institutional conditions, and environmental and climate factors significantly impact lending decisions, while borrower characteristics, regulatory frameworks, and economic indicators are less influential. The study concludes that institutional capacity and external macro-level factors play a greater role in shaping agricultural finance than individual borrower attributes, highlighting the need for stronger institutional frameworks, risk-sharing mechanisms, and targeted policy reforms to enhance credit access in the agricultural sectorItem Factors Affecting Capital Adequacy of Commercial Banks: The Case of Private Commercial Banks in Ethiopia(Addis Ababa University, 2025-09) Belayneh Zeleke; Tenkir Seifu (PhD)The purpose of the study was to identify the significant factors that determine capital adequacy of Ethiopian commercial banks from 2013 to 2024 using multiple linear regression analysis and correlation coefficient. The target population of all private commercial banks operating in Ethiopia which were established and registered between 2013 and 2024. Data was collected from sixteen private commercial banks from Secondary data. The study revealed a statistically significant positive relationship between the level of capital adequacy of commercial banks and independent variables - bank size and management efficiency. This means that the level of capital adequacy of commercial banks had a statistically significant negative relationship with the variables namely - GDP, exchange rate, nonperforming loans, and return on equity which were not mentioned here, specifically outside the abovementioned mentioned variables. The capital adequacy of commercial banks in Ethiopia has a negative relationship with inflation, but is not statistically significant. The size of a bank and Management Efficiency had a positive and statistically significant relationship with commercial banks in Ethiopia. There was a statistically insignificant positive relationship between liquidity of commercial banks and capital adequacy. The results of the study showed that the independent variables explained some variance, but more importantly the difference that changed the dependent variable, as demonstrated by the ratio of dependent variables with independent variables were expressed to be roughly 70.1% cap. The study recommended NBE should implement Basel III for the purpose of classifying the minimum capital adequacy ratio as having a capital Tier component.Item Factor Affecting Profitability of Commercial Banks in Ethiopia(Addis Ababa University, 2025-09) Belete Kassaw; Tenkir Seifu (PhD)The aim of this research was to determine the elements influencing Ethiopian commercials banks' profitability. Used a purposive judgmental sampling method, banks that produced at least 15-year financial reports were included in the sample. Hence, 14 banks were chosen from a total of 31commercial banks to achieve this goal. The data was collected over a 15-year period (2010–2024), totaling 210 data points. The study examined eight explanatory variables: Banks Size (BSZ), Capitals Adequacy Ratios (CAR), Management Efficiency Ratios (MER), Diversification of Revenue Streams (DRS), Non-Performing Loans (NPL), Market Share (MKS), and Inflation Rate (INF). The dependent variable was profitability, as determined by Return on Assets (ROA). Both explanatory and descriptive research designs were used in this study; the former sought to explain the association between the independent and dependent variables that were selected, while the latter gave a thorough description of the phenomenon being examined without necessarily pointingto its causes. Regression study revealed that NPL and INF had a substantial negative association with ROA, but BSZ, CAR, MER, MKS, and GDP showed a considerably positive link. Nevertheless,there is no noticeable connection between DRS and ROA. According to the results, Ethiopian commercial banks can increase their profitability by growing in size, improving their capital adequacy ratio (by adding more capital and improving their assets quality), increasing management effectiveness, increasing their market share (particularly in loans), controlling theirnon-performing loan ratio (NPL) for better asset quality, and adjusting their operations and strategies to the GDP and adjusting lending rate in accordance with inflation rate of the country.