The Effect of Technological Innovation Uptake on the Financial Performance of Commercial Banks in Ethiopia
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Date
2022-04
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A.A.U
Abstract
A technological innovation is a new or improved product or process whose technological characteristics are significantly different from the way they were before. Technological innovation is highly used by the banking sector to create competitive advantage. It helps banks improve their services and become more cost efficient. The aim of conducting this research is to identify the effect of technological innovation on the financial performance of the Ethiopian commercial banks. The study used secondary data which was gathered from the published annual reports of the banks. The collected data was analyzed using Eviews 9. An econometric regression model was used to determine the relationship between technological innovation and financial performance for a period of seven years (2015 – 2021). Financial performance, measured by Return on Asset (ROA), was the dependent variable. Technological innovation, measured by number of internet banking users, number of mobile baking users, number of ATMs, number of debit card holders and number of POS terminals were the independent variables. Bank size was also used as a control variable to avoid the omission of important variables. The results of the regression showed that there is a positive relationship between internet banking, ATMs, POS terminals and bank size with ROA while mobile banking and debit cards have a negative one. It also showed that while the effects of internet banking, mobile banking, debit cards, POS terminals and bank size were significant, the effect of ATMs, was insignificant. The study recommends that banks should work more on creating awareness about technological innovation and integration of their systems with other banks.
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Technological Innovation, Financial Performance, Commercial Banks