Factor Affecting Profitability of Banks in Ethiopia: The Case of Selected Commerial Banks
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Date
2024-06-13
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A.A.U
Abstract
This study aims to examine the impact of capital adequateness liquidity, and asset quality on the profitability of Ethiopian banks from 2013 to 2022. The study employed a quantitative research design and collected data through Secondary data were gathered from the annual audited financial statements of selected banks from NBE in order to meet the study's objectives. Purposive sampling was employed in the study, with Ethiopian commercial banks serving as the study population. Correlation and OLS regression analysis were utilized for inferential data analysis. Liquidity, capital adequacy, and asset quality were the study's independent variables. Return on asset (ROA) was the dependent variable used to determine profitability. The study's model result showed that while liquidity has a statistically significant negative impact on ROA, asset quality and capital adequacy have positive, statistically significant effects on ROA. The study suggests that more research be done on the qualitative relationship that asset quality, capital adequacy, and liquidity have with bank profitability. Future studies may be able to investigate the effects of asset quality, capital adequacy, and liquidity on profitability. In order to uncover hidden insights into the relationship that interacts with bank profitability, future studies involve interviewing significant informants in the banking sector.
Key Words: Bank of Ethiopia, Asset Quality, Capital Adequacy, Liquidity, Profitability