The collected data was analyzed using descriptive statistics mean median

# The collected data was analyzed using descriptive

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The collected data was analyzed using descriptive statistics (mean, median, minimum, maximum, and standard deviation) correlation analysis (to find out the relationship between the variables) and other econometric analyses were employed. Moreover, the ranking process of the targeted banks was accomplished using multi-dimensional parameters in order to incorporate different aspects of each bank specific variable. The results and/or ranks obtained in each bank specific proxy were once again summarized into a grand group composite rank-CAMEL so as to get the overall picture. As stated earlier, the financial data’s were analyzed using econometric views software (E-views). 3.6.Model Specification: The performance indicator utilized for this particular study is Return on Assets (ROA) and the major determinants (independent variables) considered were Capital Adequacy, Asset Quality, Management Efficiency, Earning Quality, and Liquidity. Hence, the econometric model utilized for regression analysis is depicted here below: πit= α0+ α1 CAit+ α2 AQit+ α3MEit+ α4EQit+ α5LMit+ εit… … …… …… (1) Where: . π it = Performance of Bank i at time t as expressed by ROA . α 0 = Intercept . CA it =Capital Adequacy of bank i at time t . AQ it = Asset Quality of bank i at time t . ME it = Management Efficiency of Bank i at time t . EQ it = Earnings Quality of Bank i at time t . LM it = Liquidity Ratio of Bank i at time t . α 1 α 5 = Coefficients parameters . ε it = Error term where i is cross sectional and t time identifier
Financial Performance of Private Commercial Banks in Ethiopia: A CAMEL Approach 2016 32 3.7. Model Assumptions: The following diagnostic tests were carried in order to ensure the data is in conformity with the basic assumptions of classical linear regression model. Normality test: (To check for normality, i.e., kurtosis and skewness of the distribution of the data will be examined) descriptive statistics were used. Multicollinearity (To check whether there is a strong correlation among the independent variables exists or not) Auto correlation ( To check whether there exists a serial relationship in the error terms) Heteroscedasticity (To detect the problem of heteroscedasticity of disturbance terms) 3.8. Description of Variables: 3.8.1. Dependent Variable The return on assets (ROA) is financial ratio used to measure the relationship of earning to total assets. ROA is regarded as the best and widely used indicator of earnings and profitability. According to Jahan (2012) ROA assesses how efficiently a bank is managing its revenues and expenses and it is also a tool that measures how a particular management of a bank is efficient enough to generate profit using available financial data and real assets. 3.8.2. Independent Variables Capital Adequacy: Availability of capital affects every aspect of banking either directly or indirectly. As stated earlier, we can find a lot of ways to determine capital Adequacy ratio in the literature. Hence, total capital to total asset ratio (CAR) is considered for this particular study. (Dang, 2011) Asset Quality:
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