Capital adequacy implies the conventional assessment of the minimal level of capital,rnaccording to certain parameters, which reflect the dimension of banking activity and ofrnrelated risks, capable to provide a correlation between the supposed obtained benefits andrnpotential loss caused by a certain risk level. Since Capital adequacy ratio (CAR) is the ratiornthat is set by the regulatory authority in the banking sector, and this ratio can be used to testrnthe health of the banking system. Thus, this study examines the relationship between capitalrnadequacy ratio and firm specific (profitability, deposits, loan loss reserve, leverage, netrninterest margin, size and liquidity) determinants of capital adequacy ratio of Ethiopianrncommercial banks. In order to investigate these issues a quantitative method researchrnapproach is utilized, by using documentary analysis. More specifically, the study uses twelvernyears (2002 - 2013) data for eight banks in Ethiopia. The study used ordinary least squarernmodel to analyse the data by eviews 6 econometric software. The findings show that deposits,rnleverage, loan loss reserve and liquidity of the banks are important determinants of capitalrnadequacy ratio of commercial banks in Ethiopia. However, management quality, profitabilityrnand size of banks are found to have no statistically significant impact on the capital adequacyrnratio of banks in Ethiopia. The analyses indicated that the variables of deposits, liquidity,rnleverage, and loan loss reserve were significantly related to capital adequacy ratio.rnTherefore, banks should pay greater attention to these significant variables in determiningrntheir capital adequacy ratiornKeywords: Capital adequacy ratio, Ethiopian Commercial Banks, Panel data analysis