Exogenous Determinants Of Commercial Banks Profitability Empirical Evidence From The Commercial Banks Of Ethiopia

The main objective of this study is to examine the effect of external determinants on Ethiopianrncommercial banks from the period 1985 -2013. External determinants were seen by classifyingrnthem in to industry-specific and macroeconomic determinants. The study used OLS estimationrnmethod to measure the effects of external determinants on profitability. Profitability wasrnmeasured by three indicators: Average Return on Asset, Average Return on Equity and NetrnInterest Margin in order to analyze the behavior of each across years. The estimation resultsrnshow that the external variables in the model altogether explain ROA significantly. However, thernexplanatory variables fail to explain the rest indicators; ROE and NIM. Being seenrnindependently, the coefficients of all explanatory variables were not significant at 10%. The NBErnand commercial banks of Ethiopia policy makers and managers should give due concern byrnforecasting those explanatory variables in order to maximize the opportunity for better profitrnand minimize the possible risks.rnKey words: profitability, commercial banks

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