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Article
Determinants of Commercial Bank Financial Performance: Empirical Evidence From Ethiopia
Author(s)
Zelalem Borena Bono
Full-Text PDF XML 1146 Views
DOI:10.17265/2328-2185/2020.03.008
Affiliation(s)
Wolaita Sodo University, Wolaita Sodo, Ethiopia
ABSTRACT
The
study examines factors that determine the financial performance of commercial banks
in Ethiopia by using time series data over the period 2004-2019 on the sample of
seven banks using secondary data. Moreover, the autoregressive distributed lag model
was used. Under this study, both internal and external factors were included as
the determinants of bank performance which was measured by loan-to-deposit ratio.
The internal factors used in this study include capital adequacy ratio, non-performing
loan and loan growth while the external factors are real GDP growth and inflation.
Based on the results, specific variables except non-performing loan capital adequacy
and loan growth affect banks performance significantly in the long run. In the short
run, in addition to those two variables, non-performing loan also affects bank performance.
Real GDP growth has negative significant effect on the banks performance in both
long and short run. Inflation has insignificant effects on bank performances in
both long and short run.
KEYWORDS
commercial banks, financial performance, autoregressive distributed lag model
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