Market Structure and its Impact on Profitability Performance of Banking Firms: A Case of Private Commercial Banking Sector in Ethiopia
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Date
2018-06
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Addis Ababa University
Abstract
This paper has investigated the impact of market structure onprofitability performance of Ethiopian private commercial banking firms. The impact of market structure on profitability performance of banks was studied based on the traditional structure-performance hypothesis (SCP) and the efficient-structure hypothesis that explains a positive correlation between profitability and market structure. A panel data of selected eightprivate commercial banks financial statement is used covering the period between 2008/9 up to 2016/17 G.C. The study employed an Ordinary Least Square regression analysis to test the impact of market structure variables (concentrations, market share)and bank specific variables (efficiency, banks size, bank risk, loan portfolio, Age) on profitability performance of banks. The regression test results confirm the significance of concentration and market share to profitability performance of banks. Efficiency, bank size, bank risk, and loan portfoliowere among the factors to alter the profitability performance of banks, whereas Age is found to be the only variable which has negative and insignificant impact on bank profitability.The study findingconfirms that traditional structure conduct performance argument did held in the commercial banking industry in Ethiopia for the period 2008/9-2016/17 G.C.
Since market structure have a significant impact on banks profitability, the management body of banks should have to pay greater attention to expand their market share and they must improve their efficiency.
Description
A research thesis Submitted to the Department of Accounting and Finance, for the partial fulfillment of the degree of Master of Science in Accounting and Finance
Keywords
Bank specific, Efficiency, Market structure