Assessment of Banking Performance Using Capital Adequacy in Ethiopia
Economics
Volume 4, Issue 6, December 2015, Pages: 106-111
Received: Jul. 28, 2015; Accepted: Aug. 12, 2015; Published: Nov. 3, 2015
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Author
Dakito Alemu, Department of Commerce and Management Studies, College of Arts and Commerce Andhra University, Andhra, India; Department of Accounting and Finance, School of Commerce, Addis Ababa University, Addis Ababa, Ethiopia
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Abstract
The data used in this study were collected from financial reports of eight sample banks and National bank of Ethiopia (NBE) for the period of 2000-2013. The objectives of the study were to evaluate the financial performance of banking sector in the Ethiopia and also to see the relation between capital adequacy and bank’s performance. In order to address these, both descriptive and econometric analyses were employed so as to assess the financial performance of the sector and the relationship between capital adequacy and bank performance. The descriptive analyses were made using CAMEL approach and central tendency measures. The descriptive data analysis shows that, as compared to other banks NIB’s overall performance was good.In addition to the descriptive data analysis, the study also employed regression model, GLS, which is used to see whether capital adequacy which is measured by the amount of shareholders fund affect the bank performance which is measured by Return on asset (ROA). The finding shows that, shareholders’ fund is the main factor that determines the performance of banking industry hence, the null hypothesis is rejected. Therefore, there exists positive relationship between capital adequacy and bank performance at 5% significant level, which is in line with theory.
Keywords
CAMEL, CAR, LA, GLS, ROA
To cite this article
Dakito Alemu, Assessment of Banking Performance Using Capital Adequacy in Ethiopia, Economics. Vol. 4, No. 6, 2015, pp. 106-111. doi: 10.11648/j.eco.20150406.12
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