Camel Components and Financial Performance of Commercial Banks in Ethiopia
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Date
2019-06
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A.A.U
Abstract
The objective of this study was to analyze the CAMEL measures on financial performance of selected commercial banks in Ethiopia. The paper tried to investigate the CAMEL measures of commercial banks in Ethiopia over the period 2008-2017 for selected six commercial banks. The study used secondary panel data and econometric model using E-views software obtained from published Financial statement from National Bank of Ethiopia (NBE). The findings have been presented in the form of tables, graphs and regression equations. The coefficient of multiple determinants also indicates that 87.6% of the changes in performance (ROE) of commercial banks in Ethiopia are explained by variables incorporated in the CAMEL components. The study found that capital adequacy ratio revealed that banks with high capital to risk weighted asset will strongly enhances the profitability of the banks, the asset quality indicated strong ratio that means its more helpful to the banks in understanding the risk on the exposure of the debtors. The study also indicates that earning ability indicates how well manager make control to the asset of the bank and equity in order to get a better earning, liquidity position of the banks under the study determines how well the banks cash deposit with foreign banks and NBE to total assets have the ability to cover immediate obligations. Based on the management efficiency ratio, the study thus recommends that commercial banks in Ethiopia should also try to keep their operational cost low that affects their profits margin to low financial performance. This study recommend also that CAMEL model can be used as a representation as proxy to measure financial performances of commercial banks in Ethiopia
Description
(A Thesis Submitted On Partial Fullfuilment Of The Master Of Accounting And Finance)
College Of Business And Economics
Department Of Accounting And Finance
Keywords
CAMEL components, E-views, Commercial Banks, Financial Performance, National Bank of Ethiopia