Determinant of Banks Liquidity commercial banks Of Ethiopia: Evidence from Newly established commercial Banks of Ethiopia

Abstract

Liquidity is one of the major concerns for banks and thus achieving the optimum level of liquidity is crucial. The main objective of this study was to identify the determinants of liquidity of newly established commercial banks of Ethiopia. In order to achieve the research objectives, data was collected from a sample of eight newly established commercial banks of Ethiopia over the period from 2008 to 2018. Bank specific variables were analyzed by using the balanced panel fixed effect regression model. Bank’s liquidity is measured by ratio: liquid asset to total asset. The findings of the study revealed that, bank size has negative and statistically significant impact on liquidity; while profitability and loan loss reserve have positive and statistically significant impact on liquidity of Ethiopian newly established commercial banks. However, capital adequacy has no statistically significant effect on the liquidly of Ethiopian newly established commercial banks.