The Effect of Strategy Types on Financial Performance: A Case Study on Selected Private Commercial Banks in Ethiopia

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Addis Ababa University


The purpose of this study is to examine the effect of strategy types on financial performance of commercial banks in Ethiopia, by using panel data of 10 commercial banks from total of 16 privately owned banks, which have been operated in the industry for over six years within the period from year 2003 to 2016. Thus, the study used a total of 121 observations which was not balanced through the sampled banks i.e. form 6 years to 14 years existence in the industry. The study used quantitative research approach and secondary financial data were analyzed by using multiple linear regression models for the bank performance measure, Return on Asset (ROA). Random effect estimation technique was applied to investigate the impact of blue ocean strategy, green ocean strategy, red ocean strategy, capital adequacy, operating efficiency, management efficiency, bank size, Asset Quality, Earning quality, liquidity management, real GDP and inflation rate on Return on Asset (ROA). And also primary data was used by preparing questionnaires to test stated research hypotheses and to answer the research questions. The result showed that using blue ocean strategy result in more ROA than using green ocean strategy and red ocean strategy have no effect on financial performance of Ethiopian commercial banks. Further, the findings of the study showed that asset quality; bank size; operating efficiency and earning quality have negative and statistically significant relationship with bank’s financial performance. On the other hand capital adequacy, management efficiency, liquidity management, inflation and gross domestic product have insignificant relation with bank’s financial performance. Thus, commercial banks in Ethiopia should give more emphasis for the strategy types that they employ.


A thesis submitted to the department of accounting and Finance (A.A.U) in partial fulfillment for the requirement of The degree of Master of Science in accounting & finance


Blue Ocean, Financial performance, Strategy