The Effect of Bank Specific Factors on Financial Performance of Private Commercial Banks in Ethiopia

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The main purpose of this paper is to investigate the effect of bank specific factors which can affect the financial performance of private commercial banks in Ethiopia. A total of 16 private commercial banks (those having well organized financial data till 2009) were purposefully taken & their audited annual financial reports were analyzed for the period of 2009-2018. For this purpose, explanatory research design, Pearson Correlation Coefficient and Multiple Linear Regression Analytical approaches were applied. In this study, return on asset taken as the dependent variables and bank specific factors liquidity management, asset quality, management efficiency, earning quality and capital adequacy as independent variables were used. Any autocorrelation problem was checked. The results indicated that capital adequacy, management efficiency and earning quality have positive and statistically significant effect on financial performance of private commercial banks of Ethiopia measured by ROA. But, liquidity management has negatively significant impact on financial performance of the banks (ROA). Finally, the study also depicted that asset quality is statistically significant determinant of sound financial performance of private commercial banks in Ethiopia. Therefore, due attention should be given in ensuring adequate capital, optimum liquidity, efficient expense management system and adequate earning quality by commercial banks for better performance and profitability in their own area of business.


A Thesis Submitted to Department of Accounting and Finance in partial Fulfillment of the Requirements for the Award of the Degree of Master of Science in Accounting and Finance


Financial Performance, Effect of Bank Specific Factors