Ownership Structure and Financial Performance of Ethiopian Banks: A Comparative Analysis of Private and State Owned Banks
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Date
2015-02
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Addis Ababa University
Abstract
The main objective of this study is to examine the effect of ownership structure on financial
performance of Ethiopian commercial banks. In order to achieve the stated objective, the study
adopts a quantitative research approach by using regression and test for means equality analysis
techniques. Balanced panel data covering ten-year period from 2004 to 2013 for eight
commercial banks are analyzed by random effect Ordinary Least Square (OLS) estimation
technique. The findings of the study show that ownership structure, bank's size, gross domestic
product and inflation have statistically significant effects on banks performance. In addition, the
empirical evidence clearly shows that private-owned banks are superior in performance than
state-owned banks. Out of eleven parameters used to measure performance five (in terms of;
return on asset, capital adequacy, asset utilization ratio, debt to equity ratio and equity
multiplier) supports the superiority of private-owned banks, two (in terms of; return on equity
and management quality) supports for state-owned banks and the remaining four (in terms of;
asset quality, loan to deposit ratio, liquid asset to deposit ratio and operating efficiency) not
statistically significant difference between the two sub-sectors. So, until the Ethiopian banks are
fully privatized, banks under government control should be made to compete with the private
banks.
Keywords: Ownership Structure, Financial Performance, Commercial Banks in Ethiopia
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Keywords
Ownership structure, Financial Performance, Commercial banks in ethiopia