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

Volume : IV, Issue : IV, April - 2015

Dr. Pentela Fareed Mastan

This study is focused on examining the impact of bank–specific, industry– specific and macroeconomic determinants of

Ethiopian commercial banks profitability with balanced panel data of seven Ethiopian commercial banks that covers

the period 2001– 2010. The paper used Ordinary Least Square (OLS) technique to investigate the impact of capital, size,

loan, deposits, noninterest income, noninterest expense, credit risk, market concentration, economic growth, inflation and saving interest rate

on major profitability indicator i.e., return on asset (ROA). The estimation results show that all bank–specific determinants, with the exception

of saving deposit, significantly affect commercial banks profitability in Ethiopia. Market concentration is also a significant determining

factor of profitability. Finally, concerning to macroeconomic variables, only economic growth exhibits a significant relationship with banks�

profitability. The results are useful to both academics and policy makers