Determinants of private bank profitability in ethiopa

On such deposits, the bank pays higher interest.

The result shows that high net interest margin and return on asset profitability tend to be associated with banks that hold a relatively high amount of capital. From this study including market concentration as industry-specific determinants and economic growth and interest rates policy as macroeconomic determinants.

On the other hand researchers expacted a positive relationship between liquidity risk and profitability and concluded that the fewer the funds tied up in liquid assets the higher expected profitability to be Eichengreen and Gibson, Moreover, it will help investors to measure the performance of their portfolios and proceed with readjustments as required.

The interest rate elasticity of loans will depend on the national affluence or national income Moin According Aburime investigation on Nigeria banking industry on the area of bank performance and supervision by adopted the data envelopment analysis approach founded that, the profitability of the bigger banks is significantly higher than that of the smaller banks.

Determinant of Bank Profitability

Furthermore, SCP recognized the competitiveness of small market share banks with large market share is weak as a result the positive relationship between market concentration and performance profitability of high market share banks exist Berger and Hannan, Therefore, researchers widely posit that the more capital a bank has, the more resistant it will be to failure.

Usually, short-term borrowings are costly and the loss of income from the sale of liquid assets will tend to have an adverse effect on profitability.

Specifically in Ethiopia the banking sector is unstudied area, though, few studies have been conducted on financial performance of Ethiopian commercial banks. Government decentralization has both political and administrative aspects.

Determinants of Private Bank Profitabliy

Structural approach has investigated how the market 12 concentration weakens the market competition by fostering collusive behavior among firms Panzar, J. There is positive direct relation between bank size and profitability.

Furthermore, they state that price risk refers to the risk that the sale price will be lower than the purchase price of an asset. The main problem in benefiting from this result is the difficulty of determining an optimal level for the capital adequacy ratio.

There is evidence that superior management raise profits and market shares Berger, and Athanasoglou et al. Decentralization strategies must account for the interrelations of global, regional, national, sub-national, and local levels.

Following prior research of Ommeren, and Rasiah a negative relationship between profitability and large liquid assets to customer deposits and short term funding ratio is hypothesize. This suggests that higher productivity growth generates income that partly channeled to bank profits.

These testable hypotheses could be formulated as follows. The second strategy is the sharing common facilities such as ATM with other banks in the industry.

In addition to this the study measure the more of financial performance of the banks.

As extensive researchers pointed out the expected sign of bank size is ambiguous. It holds that the lowest or least centralized authority which is capable of addressing an issue effectively should do so.

estimation to investigate the determinants of profitability in six selected European countries banking sectors: Denmark, France, Germany, Italy, Spain, and the UK, for the period The result suggested that bank- specific determinants and profitability relationship is very strong.

Factors Affecting the Profitability of Private Commercial Banks In Ethiopia Uploaded by Abraham Redi This paper will investigate factors influencing profitability of Ethiopian private commercial banks considering bank specific and external variables on bank profitability for the period cove /5(3).

Research on the determinants of bank profitability has focused on both the returns on bank assets and equity, and net interest rate margins.


It has traditionally explored the impact on bank performance of bank-specific factors. Research on the determinants of bank profitability has focused on both the returns on bank assets and equity, and net interest rate margins. It has traditionally explored the impact on bank performance of bank-specific factors, such as risk, market power, and regulatory costs.

knowledge regarding the determinants of banking profitability is very important to the excellent bank management for the existence and stability of banking firm as a financial intermediary and an important contributor to the economic development of a country.

The main objective of the paper is to analyze the impact of bank specific and macro-economic factors on the profitability of selected Ethiopian private commercial banks over the period of to

Determinants of private bank profitability in ethiopa
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