Determinants of Banks Liquidity: Empirical Evidence on Ethiopian Commercial Banks
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Date
2015-01
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Addis Ababa University
Abstract
Liquidity creation is the main concerns of commercial banks since it is crucial for its existence;
hence the main objective of this study was to identify the determinants of commercial banks
liquidity in Ethiopia. The data covered the period from 2007-2013 for the sample of ten
commercial banks in Ethiopia and used secondary data. Both bank specific and macroeconomic
variables were analyzed by employing the balanced panel fixed effect regression model and the
result of the study revealed that capital adequacy, profitability, and real GDP growth rate have
negative and statistically significant impacts on liquidity of Ethiopian commercial banks while
bank size has positive and statistically significant impact on liquidity. Whereas nonperforming
loan, loan growth, inflation rate, and interest rate margin were found to be statistically
insignificant/ has no any impact on liquidity of Ethiopian commercial banks for the tested
period.
Keyterms: Liquidity, Ethiopian commercial banks, liquidity determinants, balanced panel data
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Keywords
Liquidity, Ethiopian commercial banks, liquidity determinants, Balanced panel data