THE EFFECT OF BANK INNOVATION ON FINANCIAL PERFORMANCE OF BANKS: EVIDENCE FROM ETHIOPIAN COMMERCIAL BANKS

The paper focus on the effect of bank innovation on financial performance of commercial banks in Ethiopia. The study adopted an explanatory and descriptive research design with quantitative research approach. the study referenced to Ethiopian commercial banks on basis of data covers five years (2018-2022) period and the data was gotten from the reports of the regulatory body of the banks in Ethiopia i.e. the National Bank of Ethiopia (NBE), Central Statistical Authority, Ministry of Finance and Economic Cooperation and from others that are as secondary data sources from the seventeen commercial banks of Ethiopia. The Target population was all commercial banks that engage in commercial activities and registered by National Bank of Ethiopia to act. Consequently, seventeen commercial banks, out of the thirty one commercial banks, have purposively were selected for the study. The methods of analysis applied a panel least square regression using STATA vs 12 to test whether random effect or random effect regression. And the model were a random effect model selected. The finding were agent banking, Mobile banking users and Gross Domestic product were found positive effect on financial performance of commercial banks and statistically significant. Bank Liquidity negative effect on financial performance of commercial banks but statistically significant. ATM machine terminals, RTGS users, agent banking and Bank size were found positive effect on financial performance of commercial banks but statistically insignificant. Internet banking and Inflation negatively effect on financial performance of commercial banks and statistically insignificant.