Determinants of Bank Profitability: An Empirical Study on Ethiopian Private Commercial Banks
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Date
2012-06
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A.A.U
Abstract
The purpose of this study is to investigate determinants of private commercial banks
profitability in Ethiopia by using panel data of seven private commercial banks from year
2002 to 2011. The study used quantitative research approach and secondary financial
data are analyzed by using multiple linear regressions models for the three bank
profitability measures; Return on Asset (ROA), Return on Equity (ROE). and Net interest
Margin (N/M). Fixed effect regression model was applied to investigate the impact of
capital adequacy. asset quality. managerial efficiency, liquidly. bank size, and real CD?
growth rate on major bank profitability measures i.e .. (ROA), (ROE). and (N1M
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separately. Beside this the study used primary data analysis 10 solicit mangers perception
towards the determinants of private commercial banks profitability. The empirical
results shows" that bank specific factors; capital adequacy, managerial efficiency. bank
.size and macro-economic factors; level of CDP, and regulation have a strong influence
On the profitability of private commercial banks in Ethiopia. This, management bodies of
private commercial bank should strive to strengthen the identified significant factors and
gOl'el'Jlmel1t bodies should also see tile adverse effect of tight polices imposed on the
existing private banks as well as for the new entrants.
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Keywords
profitability, commercial banks