Factors Affecting Capital Lease Financing Companies Financial Performance in Ethiopia

The main aim of the study is to investigate factors affecting capital lease financing company’s financial performance in Ethiopia. Explanatory research design was employed since the study has cause and effect relationship with quantitative research approach. The target population of the present study was five formally registered and overseen by National Bank of Ethiopia these financing companies currently functional. Because of the lease financing companies in Ethiopia are five in number it is manageable to include all in the sample of the study, so census sampling method was employed as a sampling technique. Both primary and secondary data collection methods were used for the present study, primary data was collected from the managers and accountants of each lease financing companies, whereas, secondary data was collected from lease financing financial report for the period of 2014-2023 obtained from National Bank of Ethiopia. This study investigates the factors influencing financial performance, with a particular focus on Access to Funding (AF), regulatory framework (RFW), Business Size (BS), Asset type (AT), and Tax incentives (TI). a multiple linear regression and correlation analysis were conducted to assess the individual and collective impacts of these variables and also SPSS software used to manipulate the raw date in to meaningful insight. The result of the study shows there is a negative relationship between business size and financial performance of lease financing companies, asset type and financial performance has negatively correlated, tax incentive is positively associated with financial performance of lease financing companies, & access to funding also negatively correlated with financial performance of lease financing companies in Ethiopia. Suggestions forwarded by the researcher are; the lease companies and its management is good to adequately manage its machineries and maximize profit from its leasing with due care to obsolesces, as it has a positive and statistically significant impact on their financial performance in short or long run. & tax incentives provided by the government does have a positive and statistically significant impact on the financial performance of the company, therefore, the management of the companies should use this opportunity as one of its profit maximization strategy.