Volume : 4, Issue : 4, April - 2015

An empirical study on the determinant factors of Ethiopian commercial banks profitability

Dr. Pentela Fareed Mastan

Abstract :

<p>&nbsp;This study is focused on examining the impact of bank&ndash;specific, industry&ndash; specific and macroeconomic determinants of&nbsp;</p> <div>Ethiopian commercial banks profitability with balanced panel data of seven Ethiopian commercial banks that covers&nbsp;</div> <div>the period 2001&ndash; 2010. The paper used Ordinary Least Square (OLS) technique to investigate the impact of capital, size,&nbsp;</div> <div>loan, deposits, noninterest income, noninterest expense, credit risk, market concentration, economic growth, inflation and saving interest rate&nbsp;</div> <div>on major profitability indicator i.e., return on asset (ROA). The estimation results show that all bank&ndash;specific determinants, with the exception&nbsp;</div> <div>of saving deposit, significantly affect commercial banks profitability in Ethiopia. Market concentration is also a significant determining&nbsp;</div> <div>factor of profitability. Finally, concerning to macroeconomic variables, only economic growth exhibits a significant relationship with banks&rsquo;&nbsp;</div> <div>profitability. The results are useful to both academics and policy makers</div>