Determinants Of Bank Profitability An Empirical Study On Ethiopian Private Commercial Banks

The purpose of this study is to investigate determinants of private commercial banksrnprofitability in Ethiopia by using panel data of seven private commercial banks from yearrn2002 to 2011. The study used quantitative research approach and secondary financialrndata are analyzed by using multiple linear regressions models for the three bankrnprofitability measures; Return on Asset (ROA), Return on Equity (ROE). and Net interestrnMargin (N/M). Fixed effect regression model was applied to investigate the impact ofrncapital adequacy. asset quality. managerial efficiency, liquidly. bank size, and real CD?rngrowth rate on major bank profitability measures i.e .. (ROA), (ROE). and (N1Mrn)rnseparately. Beside this the study used primary data analysis 10 solicit mangers perceptionrntowards the determinants of private commercial banks profitability. The empiricalrnresults shows" that bank specific factors; capital adequacy, managerial efficiency. bankrn.size and macro-economic factors; level of CDP, and regulation have a strong influencernOn the profitability of private commercial banks in Ethiopia. This, management bodies ofrnprivate commercial bank should strive to strengthen the identified significant factors andrngOl'el'Jlmel1t bodies should also see tile adverse effect of tight polices imposed on thernexisting private banks as well as for the new entrants.

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