3 P age Furthermore commercial banks of Ethiopia maintain good business

3 p age furthermore commercial banks of ethiopia

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Furthermore, commercial banks of Ethiopia maintain good business relationships withvarious well-known international banks throughout the globe1. As a result commercialbanks of Ethiopia can be directly affected through international banking activities.In addition as a result of regulatory requirements, financial and technological innovationCommercial banks in Ethiopia were faced with increasing competition and rising costs.Therefore these factors increasingly urge the need of more frequent banking examinationparticularly on their performance.The measurements of commercial bank performance in different regions have beenresearched well and received increased attention over the past years (for example Kouser,2012; Reddy, 2012; Ashamu, 2012; Kumbirai and Webb (2010),Prasad, 2012;Webb,2003; Tarawneh, 2006; Kiyota, 2009; Samad, 2004)However, as far as the researcher knowledge, there is scanty research that had beendone on this area particularly on the overall commercial banks performance and globalfinancial crisis impact on Ethiopian commercial banks performance using Capitaladequacy, Asset quality, Managements efficiency and Liquidity (CAMEL) model.1.3 Objective of the Study1.3.1 General ObjectiveThe main objective of this study is to measure the financial performance and the impactof Global financial crisis on the financial performance of commercial banks of Ethiopiaduring the period 2004/5-2010/11.1Commercial Banks of Ethiopia maintains a SWIFT bilateral key exchange arrangement with 520 banks ofinternational renown. Also By the end of 2011, Dashen Bank’s correspondent banking relationship inSWIFT covered 161 cities in 68 countries (annual report, 2011).4 |P a g e
1.3.2 Specific ObjectivesIn light of the general objective the study has the following specific objectives,1. To examine the adequacy of capital employed by the banks.2. To examine the banks' asset quality.3. To examine quality of Managements on the financial performance of banks4. To examine the quality of banks'earnings. 5. To measure the Liquidity2of1.4 HypothesisTo examine whether the global financial crisis have a significant impact on theperformance of commercial banks in Ethiopia, the following hypotheses formulatedbased on the literatures;There is no change between the International Banking Activities (IBA) variablesgrowth mean before the crisis (2004/5-2005/6) and during the crisis (2007/8-2008/9)2Liquidity is the ability of asset to be converted in to cash without losing their value to meet maturingfinancial obligations.5|Page
1.5 Significance of the StudyBerger & Humphrey (1997) assert that the whole idea of measuring bank performance isto separate banks that are performing well from those which are doing poorly. Theyfurther indicated that, “evaluating the performance of financial institution can informgovernment policy by assessing the effects of deregulation, mergers and marketstructure on efficiency” (p175).

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