Determinants of Lending Behavior of Banks: A Case Study on Commercial Banks of Ethiopia
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Date
2014-05
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Addis Ababa University
Abstract
This study investigated the determinants of commercial banks‟ lending behavior in the Ethiopian
context. The study aimed to test and confirm the effectiveness of the common determinants of
commercial banks lending behavior and how it affects the lending behavior of commercial banks
in Ethiopia. Balanced fixed effect panel regression was used for the data of eight commercial
banks in the sample covered the period from 2001 to 2013. Seven factors affecting banks loan
and advance were selected and analyzed. The results of panel data regression analysis showed
that volume of deposit and bank size had positive and significant impact on loan and advance.
Liquidity ratio and interest rate had negative and significant impact on loan and advance. Cash
reserve requirement, and inflation rate had positive and significant impact on loan and advance
but the coefficient sign was not as expected. Real GDP growth rate had statistically insignificant
impact on bank‟s loan and advance. The study then suggests that commercial banks should focus
on mobilizing more deposits as this will enhance their lending performance and should formulate
critical, realistic and comprehensive strategic and financial plans
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Master of science in accounting and finance