Impact of Managerial Factors on Commercial Bank Profitability: Empirical Evidence from Ethiopia Banks

Abstract

The main purpose of this paper was to determine the impact of managerial factors on profitability, empirical evidence of commercial banks of Ethiopia. Specifically, the study empirically examined impact of bank liquidity, capital adequacy, bank size, cost efficiency and deposit to asset ratio on banks profitability. 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 profitability, whereas bank liquidity and deposits to asset ratio was negatively correlated with banks profitability. However, banking size has negative but statistically insignificant relationship with profitability of banks in Ethiopia. Therefore, in the case of Ethiopia banks, bank size has not considered as a factor that effect on profitability of Ethiopia banks.

Keywords: Managerial Factors,   Profitability, multiply regression and Commercial banks of Ethiopia.