Determinants Of Capital Adequacy Ratio An Empirical Study On Commercial Banks Of Ethiopia

This study was conducted to examine bank specific and macroeconomic determinant factors ofrnCapital Adequacy ratios of commercial banks in Ethiopia. To this end, the researcher collectedrnsecondary sources of panel data over the period 2002-2013from eight senior commercial banksrnin Ethiopia selected based on purposive sampling.rnThe research finding revealed that Bank size (SIZE), liquidity (LQR) and Non-Performing Loanrn(NPL) ratio had positive whereas Inflation (INF) had negative, but insignificant effect on CARrnof commercial banks in Ethiopia. The share of deposit (DAR), Loan(LAR), Loan provisionrn(LPR), Bank risk (RAR), Return on equity and Economic growth (GDP) had negative andrnstatistically significant effect on Capital Adequacy ratios of commercial banks in Ethiopia.rnFurthermore, Return on Asset (ROA) and Net interest Margin (NIM) had positive andrnstatistically significant effect on CAR of commercial banks in Ethiopia.rnThe finding of this study is significant as it revealed to bank managers the relevant factors to takerninto consideration when they make financial policies to maintain at least the expected requiredrnlevel of CAR. Based on the findings, the study recommends to the management of NationalrnBank of Ethiopia to revise the existing minimum requirement based on Basel III accord and alsornto influence commercial banks in order to disclose all component of CAR in detail in theirrnannual financial statement

Get Full Work

Report copyright infringement or plagiarism