Previous studies Country Conclusion and Knowledge

Previous studies country conclusion and knowledge

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Previous studies (Country level) ............................................................................................................ 25 2.5.3. Conclusion and Knowledge Gap ........................................................................................................... 26 2.6. Conceptual Framework .............................................................................................................................. 27 CHAPTER THREE: METHODOLOGY ................................................................................................................ 28 3.1. Research Design: ........................................................................................................................................ 28 3.2. Sample Design: .......................................................................................................................................... 29 3.2.1. Population or Universe .......................................................................................................................... 29 3.2.2. Sample Frame ........................................................................................................................................ 29 3.2.3. Sample Units, Sample Technique, and Sample size /Sampling / ........................................................... 30 3.3. Data Source/Types of Data: ....................................................................................................................... 30 3.4. Data Collection Methods: ........................................................................................................................... 30 3.5. Data Analysis: ............................................................................................................................................ 31 3.6. Model Specification: .................................................................................................................................. 31 3.7. Model Assumptions: .................................................................................................................................. 32 3.8. Description of Variables: ........................................................................................................................... 32 3.8.1. Dependent Variable ............................................................................................................................... 32 3.8.2. Independent Variables ........................................................................................................................... 32 CHAPTER FOUR: ANALYSIS AND DISCUSSION ............................................................................................ 34 4.1. The Ranking Process .................................................................................................................................. 34 4.1.1. Capital Adequacy: .................................................................................................................................. 34 4.1.2 Assets Quality: ....................................................................................................................................... 38 4.1.3 Management Efficiency: ........................................................................................................................ 43 4.1.4 Earning Quality: ..................................................................................................................................... 48 4.1.5 Liquidity ................................................................................................................................................ 52 4.1.6 Grand Composite Ranking (overall performance): ................................................................................ 56 4.2 E-view Results ........................................................................................................................................... 57 4.2.1 Results of the Descriptive statistics ....................................................................................................... 57 4.2.2 Discussion on econometric results ............................................................................................................. 58 4.3 Interview Results: ....................................................................................................................................... 63 4.3.1 With bank representatives: ..................................................................................................................... 63 4.3.2 With the supervisory organ representative: ........................................................................................... 64
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vii CHAPTER FIVE: CONCLUSION AND RECOMMENDATION ...................................................................... 66 5.1. CONCLUSION .......................................................................................................................................... 66 5.2 RECOMMENDATION: ............................................................................................................................ 68 REFERENCES .......................................................................................................................................................... 69 ANNEXES .................................................................................................................................................................. 72 Annex-1: List of banks in Ethiopia .......................................................................................................................... 72 Annex-2: Sample CAMEL Variable Measurements .............................................................................................. 73 Annex-3: Sample Interpretation of CAMELS Composite Rating ......................................................................... 73 Annex-4: Interview Questions- For Target Bank Representatives ....................................................................... 74 Annex-5: Interview Questions- For BSD Representative ....................................................................................... 75 Annex-6: Test for Normality ..................................................................................................................................... 76 Annex-7: Correlation Matrix .................................................................................................................................... 76
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viii ACRONYMS AFDB: African Development Bank AIB: Awash International Bank SC ATM: Automatic Teller Machine BIS: Banking Supervision of International Settlement BOA: Bank of Abyssinia SC BSD: Banking Supervision Directorate CAR: Capital Adequacy Ratio CBK: Central Bank of Kenya DAB: Dashen Bank SC ECB: European Central Bank GDP: Gross Domestic Product ICT: Information Communication Technology IMF: International Monetary Fund MFIs: Micro Finance Institution’s NBE: National Bank of Ethiopia NIB: Nib International Bank SC NIM: Net Interest Margin ROA: Return on Assets ROE: Return on Equity RBS: Risk Based Supervision SSA: Sub Saharan Africa UNB: United Bank SC WEB: Wegagen Bank SC
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Financial Performance of Private Commercial Banks in Ethiopia: A CAMEL Approach 2016 1 CHAPTER ONE: INTRODUCTION 1.1 Background of the Study Though economic development of a particular country is dependent on a number of factors such as industrial growth and development, modernization of agriculture, expansion of domestic and foreign trade, its dependence to largest extent on the banking sector is undeniable and/or banks play a key role in improving economic efficiency by channeling funds from resource surplus unit to those with limited access and/or the needy. Misra & Aspal (2013) According to Zerayehu et al., (2013) a sound financial system is indispensable for a healthy and vibrant economy. The financial system in Ethiopia, which is characterized as highly profitable, concentrated, and moderately competitive is dominated by banking Industry and it is also amongst the major under banked economy in the world (World Bank, 2013). The development of
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