FACTOR AFFECTING THE PROFITABILITY OF ETHIOPIAN COMMERCIAL BANK OF ETHIOPIA (IN CASE OF NEWLY ESTABLISHED COMMERCIAL BANKS)

Abstract

The purpose of this study is to examine the factor of bank-specific and macroeconomic factors of newly established commercial bank profitability in Ethiopian. The study used panel data of five new commercial banks from year 2010 to 2018. The study employed an explanatory type of research and secondary financial data were used. Fixed effect regression model was applied to investigate the factor of bank size, capital adequacy, liquidity ratio, management efficiency, loan to deposit ratio, capital structure, GDP and inflation rate on profitability. Return on assets (ROA) was used as a measure of profitability. The major findings of the study show that firm size and inflation have statistically significant and positive relationship with banks’ profitability whereas the capital structure and GDP growth have statistically significant and relation with bank profitability bank profitability. Further, the results from the panel regression suggest that, liquidity ratio, capital adequacy are spastically insignificant relation to profitability whereas loan to deposit ratio and management efficiency have a and statistically insignificant relationship with banks’ profitability