Impact of Diversification on the Efficiency of Ethiopian Commercial Banks: Bankers’ Perspective

Abstract

The study explores the relationship between diversification and financial stability in Ethiopian commercial banks. Data was gathered via a census survey utilizing a Likert scale questionnaire. The study employed a descriptive and explanatory design utilizing a quantitative research methodology. An ordinal logistic regression analysis was used to investigate how Ethiopian commercial bankers view the relationship between diversity and efficiency. The findings reveal that sectoral diversification, income diversification, investment diversification, and intellectual capital efficiency are significant predictors of bank efficiency. However, deposits, assets, and geographical diversifications have some reducing effects. The study recommends practical diversification strategies and adequate investments in intellectual capital to enhance banks’ efficiency.

Keywords: Diversification, Efficiency, Bankers, Commercial Banks,   Ethiopia.

DOI: 10.7176/RJFA/15-4-04

Publication date: April 30^th 2024