Evaluation of financial performance of commercial banks in Ethiopia

Abstract

newline ABSTRACT newlineThis research thesis has been taken up to fulfill the requirements of the award of the newlineDegree of Doctor of Philosophy in Commerce and Management Studies, Andhra newlineUniversity, India. The study covered all seventeen commercial banks in Ethiopia newlineoperating for the period of eight years from 2013 to 2020. The main objective of the study newlinewas to evaluate the financial performance of commercial banks in Ethiopia using the newlineCAMELS ranking approach and panel regression analysis. The financial performance of newlinethe banks was measured by profitability in terms of ROA and ROE. The ROA and ROE newlinewere used as dependent variables while all CAMELS factors were used as independent newlinevariables. Based on theoretical frameworks and empirical studies, hypotheses of the newlinestudy were developed and the relationship among variables was established. The newlinequantitative secondary data was gathered from audited financial statements of respective newlinebanks, from their websites, and websites of the National Banks of Ethiopia. To evaluate newlinethe financial performance of the banks, the researcher used two ways of assessment. The newlinefirst one was the CAMELS composite ranking which showed us the ranks of banks in newlineevery aspect of variables as well as their entire performance. The second one was newlinedesigned to estimate the panel data regression analysis. Thus, the fixed effects model was newlineappropriate according to the Hausman specification test of estimator efficiency. The newlineresult of the study revealed that, in the evaluation of the overall average CAMELS newlinecomposite ranking, the Wegagen and the Lion International Banks got the first and newlinesecond positions. The CBE which is the government bank found at the eleventh position, newlineand the Abay and the Abyssinia banks were in the last positions among all banks. The newlinedescriptive statistics output of ROA implied that the banks performance generally poorly newlineperformed in terms of ROA since the ratio is below the average threshold. However, the newlineratio of ROE showed remarkable results. The result of regression analysis im