Detrminants Of Profitablity Of Private Commercial Banks In Ethiopia

The general objective of the study was to examine the Determinants of private Commercial Banks<br> Profitability in Ethiopia by using balanced panel data of eleven private commercial banks for the<br> time series segments of (2009-2020). The study identified thirteen explanatory variables from both<br> internal (bank specific) and external (macroeconomic) attributes. Return of asset (ROA) and<br> return of equity was used as a measure of profitability. According to Hausman specification test<br> of fixed effect model and random effect model was preferred and applied to examine the effect of<br> bank size, capital adequacy, deposit growth, liquidity risk, operating efficiency, income<br> diversification, branch expansion and bank age, real GDP, inflation rate, lending rate, foreign<br> exchange rate &amp; unemployment on profitability (ROA) and (ROE).<br> The main finding of the study shows that determinant factors such as bank size, capital adequacy,<br> deposit growth, income diversification and branch expansion were statistically significant and<br> positive relationship with profitability of private commercial banks. In contrast, Liquidity risk,<br> operational efficiency, bank ages and foreign exchange rate were statistically significant and<br> negative relationship with profitability. However, no evidence is found about the significant<br> relation between real GDP growth rate, unemployment rate, inflation rate and lending rate with<br> profitability of private commercial bank.