Impact of Asset Liability Management on Profitability of Commercial Banks in Ethiopia
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Date
2017-06
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Addis Ababa University
Abstract
The purpose of this study was to investigate the impact of asset liability management on
profitability of banks in Ethiopia by using panel data of seven commercial banks from year
2005 to 2016. The study used quantitative research approach and analyzed by using
regression models Moreover, ROA, were used to measure profitability, Fixed effect regression
model was applied to investigate the impact of capital adequacy, asset quality, operational
efficiency, liquidity, income diversification and bank size. The finding of the study shows that
income diversification, liquidity, bank size statistically significant and positive effect on
banks profitability. On the other hand, variables like asset quality and operational efficiency
has a negative and statistically significant effect on banks profitability. However, the
relationship for capital adequacy is found to be statistically insignificant. The study revealed
that asset quality ratio, operational efficiency, income diversification, liquidity, bank size are
the key driver of return on asset of banks, Therefore, Bank managers are advised to give due
attention to the significant variables to Improve profitability.
Key words: Profitability, Commercial banks, Asset liability Management
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Keywords
Profitability, Commercial banks, Asset liability management