The Effect of NBE Bill on the Performance of Commercial Banks
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Date
2018-06
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Addis Ababa University
Abstract
This study assessed the effect of NBE bill on the performance of commercial banks. To achieve the overall objective, data were collected from annual report of the selected eight commercial banks. To determine the sample commercial banks, the study was used purposive sampling techniques. Accordingly; from sixteen total commercial banks, eight of them were selected, i.e. Four of them from middle peer group and Four of them from small peer groups, considering their establishment years, asset size, capital level, liquidity positions and profitability. As the study was aimed to assess the effect of NBE Bill Purchase on performance of commercial banks, trend analysis was applied. Accordingly, the study compares and contrasts performance of commercial banks based on annual report of each bank before and after the directive. The study also tests the relationship between dependent and independent variables using correlation and linear regression analysis. The result showed that, NBE bills purchase have negative and significant impact on profitability of the studied private commercial banks by reducing interest income. Similarly, purchasing NBE bills had negative and significant impact on liquidity of the studied commercial banks by reducing the liquid asset of the bank. In addition, the pre and post periods comparison revealed liquidity of private commercial banks decreased after requirement of the Bill. Thus, the NBE bills purchase directive has negative impact on almost all performances indicators of the studied commercial banks. Considering the output of the research, widening of income basis, introduction of new products to reach unbanked society, revision of government policy imposed on private banks in terms of tenure and interest rate and further exploration on the long run impact of the requirement is recommended.
Description
A Thesis Submitted to
The Department of Accounting and Finance
College of Business and Economics
Presented in Partial Fulfillment of the Requirement for the Degree of
Masters of Science in Accounting and Finance
Keywords
Liquidity, NBE bill of Purchase, Profitability