Determinants of Commercial Banks Profitability: An Empirical Study on Private Commercial Banks in Ethiopia
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Date
2017-02
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Addis Ababa University
Abstract
Both internal and external determinants of Bank profitability affect the profitability of
Private Commercial Banks in Ethiopia. This study identifies bank specific, industry
specific and macroeconomic factors that determine the profitability of Ethiopian private
commercial banks. Six private commercial banks have been the subject for the study
ranging from 2004/2005 to 2014/2015. The bank's Audited financial statement, National
Bank of Ethiopia and Ministry of finance and Economic Cooperation has been the main
source for the study and the panel analysis has been carried out to obtain the result for
this empirical study. The study used ROA as a Dependent variable and capital adequacy,
operational efficiency, liquidity, income diversification, concentration, GDP, inflation
and money supply as independent variables. The empirical results showed that capital,
operational efficiency, income diversification, concentration and money supply have
significant relationship with profitability of Ethiopian private commercial banks.
However the result shows insignificant relationship between profitability of Ethiopian
private commercial banks with liquidity, GDP and inflation.
Keywords: Profitability, Private Commercial Banks
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Keywords
Profitability; Private commercial banks