Impact of Internet Banking on Financial Performance: Empirical Evidence from Commercial Banks of Ethiopia

Abstract

The main objective of this study was to examine the impact of internet banking on financial performance, empirical evidence of commercial banks of Ethiopia. Specifically, the study empirically examined impact of internet banking, bank liquidity, capital adequacy, bank size, cost efficiency, deposit to asset ratio and inflation on financial performance. This study adopted explanatory research design with arrangement of secondary method of data collection via document analysis, panel, quantitative approach and deductive method of inquiry. The sample of this study was taken 10 banks covering the period 2010-2016. Descriptive and regression analysis were performed to analyze the data using Stata version 12. Besides, econometric model estimation procedures and specification tests plus multiple regression assumptions were tested. Accordingly, random effect regression model was chosen. The results of random effect regression analysis revealed that capital adequacy and cost efficiency were positively associated to banks financial performance, whereas bank liquidity, deposits to asset ratio and inflation was negatively correlated with banks financial performance. However, internet banking and size of banks has positive and negative respectively but statistically insignificant relationship with financial performance of banks in Ethiopia. Therefore, in the case of Ethiopia banks, internet banking and bank size has not considered as a factor that impact on financial performance of Ethiopia banks.

Keywords: Internet banking, financial performance, multiply regression and Commercial banks of Ethiopia.