Macroeconomic Factors Affecting Commercial Banking Performance: A Panel Analysis From Selected Banks In Ethiopia

Author(s)

Fentaw Leykun , Dr. Dhiraj Sharma ,

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Volume 2 - June 2020 (06)

Abstract

Using the GMM estimator technique described by Arellano and Bover (1995), this paper analyses how macroeconomic variables affect the profitability of commercial banks operating in the country over the period from 2005 to 2014. The estimation result shows that the determinants of bank profitability included in the model can explain existing theories in banking and economic literature. Controlling for other bank and industry factors, the result confirms the direct relationship between real GDP growth and inflation rate with commercial banks’ profitability (ROAA). The effect of inflation was significant but the cyclical output is found insignificant to explain banks’ profitability.

Keywords

Cyclical output; determinants; GMM; inflation

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Cite this Article:

Fentaw Leykun, Macroeconomic Factors Affecting Commercial Banking Performance: A Panel Analysis From Selected Banks In Ethiopia, International Journal of Empirical Finance and Management Sciences 06(2020):45-59 DOI: