Does Liquidity Determine Profitability of Ethiopian Private Commercial Banks?
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Date
2018-12
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Addis Ababa University
Abstract
The major focus of this study is to answer the question does liquidity determine profitability’s in
the case of private commercial banks in Ethiopia. Eight private commercial banks were included
in the sample that had at least ten years annual report out of sixteen. Document review was used
for collecting data from 2008- 2017 annual reports.In line with this objective, the study adopted
quantitative methods of research approaches to test the study hypothesis. The study applied
return on assets as the proxy for financial profitability and panel data with its fixed effect
estimate to test a series of hypotheses that emergethrough the review of existing literature. The
collected data then analyzed using descriptive statistics, correlation analysis, and panel data
regression analysis. To confidently forward conclusion, normality, multicollinearity,
heteroscedasticity and autocorrelation tests were conducted on the data. The data then were
processed using Eviews 10 statistical package. The results show that: the profitability of sampled
banks was determined by their liquidity. Overall variables such as liquid assets to total asset
ratio, liquid assets to total deposit ratio, loan to total asset ratio and loan to total deposit ratio
found positive significant influence on profitability of private commercial banks in Ethiopia.
Finally, private commercial banks most focus on effective liquidity management to maximize
their profitability was given as recommendation.
Description
A thesis submitted to the Department of Accounting and Finance in
partial fulfillment of the requirement for the degree of Master of Science
in Accounting and Finance
Keywords
Commercial bank, Liquidity, ROA