Financial Performance of Private Commercial Banks in Ethiopia: A CAMEL Approach
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Date
2016-02
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Addis Ababa University
Abstract
The role of banking sector for sustainable growth of a nation is unquestionable. Hence, this paper has investigated
the effects of internal determinants of profitability of six senior private Ethiopian commercial banks over the period
2000-2014 and thereby ranked the overall financial performance of the respective banks based on CAMEL model
This paper used fixed effect least square method to estimate the impact of bank specific factors and detailed
descriptive statistics and regression analysis has been used to assess the relationships between the bank specific
variables that comprise CAMEL model and return on assets has been used as a measure of profitability. The
findings indicated that bank specific factors incorporated in the CAMEL model affect to the extent of 67.5% of the
changes in profitability of the private commercial banks in Ethiopia. Moreover, ranking of the respective banks was
made based on the aggregate of multi-dimensional parameters of each bank specific proxies found in the CAMEL
model. As a result, UNB, NIB, and BOA have held from 1 st to 3 rd rank based on the CAMEL model composite rating
system.
Key words: CAMEL model, Multi-dimensional ranking, Ethiopian private commercial banks
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Keywords
CAMEL model; Multi-dimensional ranking; ethiopian private commercial banks