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

Abstract

The main objective of study was examined 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 and deposit to asset ratio on financial performance. This study adopted correlation 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 10 banks covering the period 2010-2016. Descriptive and regression analysis were performed to analyze the data. Besides, econometric model estimation procedures and specification tests plus multiple regression assumptions were tested. Accordingly, fixed effect regression model was chosen. The results of fixed effect regression analysis revealed that internet banking, capital adequacy and cost efficiency were positively associated to banks financial performance, whereas deposits to asset ratio were negatively correlated with banks financial performance. Hence, those banks with adoption of internet banking, higher capital adequacy, higher cost efficiency and lower deposit asset ratio established better banks financial performance than those with non-adoption of internet banking, lower capital adequacy, lesser cost efficiency and higher deposit to asset ratio established banks in Ethiopia. However, size of banks and banks liquidity has negative but statistically insignificant relationship with financial performance of banks in Ethiopia. Therefore, in the case of Ethiopia banks, bank size and banks liquidity have 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.