Determinants of Commercial Banks Profitability: An Empirical Study on Ethiopian Commercial Banks
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Date
2011-06
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A.A.U
Abstract
The aim of this study is to examine the impact of bank-specific, industry-specific and
macroeconomic determinants of Ethiopian commercial banks profitability. The study
applied the balanced panel data of seven Ethiopian commercial banks that covers the
period 2001- 2010. The paper used Ordinary Least Square (OLS) technique to investigate
the impact of capital, size, loan, deposits, noninterest income, noninterest expense, credit
risk, market concentration, economic growth, inflation and saving interest rate on major
profitability indicator i.e., return on asset (ROA). The estimation results show that all bank specific
determinants, with the exception of saving deposit, significantly affect commercial
banks profitability in Ethiopia. Market concentration is also a significant determining
factor of profitability. Finally, with regard to macroeconomic variables, only economic
growth exhibits a significant relationship with banks' profitability. The results of the study
are of value to both academics and policy makers.
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Keywords
Determinants of Commercial, Ethiopian Commercial Banks