Determinants of Liquidity Risk: Evidence from Ethiopian Private Commercial Banks
No Thumbnail Available
Date
2019-03
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
Risk is part and parcel of banking business. This study examines to find out the determinants of
liquidity risk in Ethiopian private commercial banks. The study identifies some of bank specific
and macroeconomic determinants that influence liquidity risk of private commercial banks in
Ethiopia based on empirical literature review. The study used a sample of thirteen private
commercial banks covering the period from 2000 to 2017 year financial statements with
unbalanced panel data. Financing gap to total asset ratio was used as proxy for liquidity risk.
The random effect regression technique and correlation analysis was used to analyze the data
using the econometric package STATA version 13 software. The random effect regression
revealed that from bank specific explanatory variables loan growth, return on asset, leverage
and operational inefficiency have significant influence on private commercial banks liquidity
risk. Lending interest rate and money supply growth also have significant impact on liquidity
risk of Ethiopian private commercial banks from macroeconomic variable. However, according
to the study size of the bank, tangibility and real GDP growth rate are not power full variable to
influence liquidity risks of Ethiopian private commercial banks. Finally, each commercial bank
should consider the fluctuation of loan growth, return on asset, leverage, operational
inefficiency, lending interest rate and growth in money supply in their respective liquidity risk
policy as a framework to control liquidity risk.
Description
A Thesis Submitted to the School of Graduate Studies of Addis Ababa
University in Partial Fulfillment of the Requirements for the Degree of
Master of Science in Accounting and Finance.
Keywords
Bank Specific, Ethiopian Private Commercial Banks, Liquidity Risk and Macroeconomic