The Effect of Strategy Types on Financial Performance: A Case Study on Selected Private Commercial Banks in Ethiopia
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Date
2017-06
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Addis Ababa University
Abstract
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.
Description
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
Keywords
Blue Ocean, Financial performance, Strategy