The Effect of Bank Regulation on Profitability of Private Commercial Banks in Ethiopia
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Date
2017-01
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Addis Ababa University
Abstract
This study empirically examines the effect bank regulation on performance of private
commercial banksin Ethiopia and interprets the result by relating with the regulations. The
studyused balanced panel model in examining the regression model and collect data from
sevenprivate commercial bankscovering the period of eleven (11)consecutive years, 2005-
2015. To this end, the study employed a quantitativeresearch approach by documentary
analysis based on their audited financial statement. The study used one dependent variable
return on asset (ROA), five independentvariables that are equity investment, legal reserve
requirement, capital requirement, Capital adequacy and bank size.The regression result
showedthat capital requirement and bank size had a positive and significant effect on
profitability of private commercial banks. Capital adequacy and reserve requirement had
negative and significant effect on profitability. Equity investment had negative but
insignificant effect on performance of private commercial banks in Ethiopia. The research
provides evidence of majorityvariables used to measurebank regulationhas an effect on
profitability of Ethiopian private commercial banks. Hence, the study recommendsthat
Ethiopian private commercial banks should give due attentionon bank regulationto enhance
their profitability significantly.
Key words: - Bank, Bank regulation and Performance
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Keywords
Bank; Bank regulation and Performance