Determinants of Financial Stability of Commercial Banks in Ethiopia
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Date
2024-05-02
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Publisher
A.A.U
Abstract
This study examined the factors affecting commercial banks' financial stability in Ethiopia over a
year (2015-2023). The study focuses on commercial banks in Ethiopia, established before the year
2015 including one state-owned bank and the remaining private banks. Purposive sampling was
used
to acquire data on nine commercial banks' audited financial accounts. Data were analyzed
using balanced panel data and a quantitative research technique. Results are computed using fixed
effect regression models. The study found a substantial positive correlation between bank capital
adequacy ratio,
asset quality, competition and financial stability. The study also found that bank
financial stability was negatively correlated with earning capacity, however this association was
not statistically
significant. The management efficiency, and liquidity has a positive and
statistically insignificant correlation with the financial stability of commercial banks in Ethiopia.
This study suggests that banks, regulators, and policymakers prioritize capital adequacy ratio, asset
quality, and competition to ensure financial stability of commercial banks in Ethiopia.