Determinants of Financial Distress in Ethiopia Banking Sector

Aman, Eliyas Ebrahim

doi:10.29322/ijsrp.9.05.2019.p8914

Cited by 3 publications

(1 citation statement)

References 6 publications

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“…In addition to CGP, capital structure choice and allocation strategies remain equally critical factors affecting firms, from CFP to the strategic financial decision. According to Aman (2019), the most private and fragmented financial institutions own more private financial reserves than global firms due to the difficulty and cost of seeking contemporary external finance. This issue is particularly true in developing countries like Ethiopia, where the financial market is inefficient and has high information asymmetry.…”

Section: Introductionmentioning

confidence: 99%

Does the Corporate Governance Practice Support the Corporate Financial Performance of Banking Industries in Ethiopia? Panel Data Analysis

2023

ISEA

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The high-profile corporate collapses and failures in early 2000s changed the image of accounting, auditing, and regulatory environments. As a result, the need for implementing effective corporate governance practice (CGP) in corporate financial institutions has gained significant attention worldwide. Effective CGP paves the way for access to finance, lower cost of capital, better corporate financial performance (CFP), and favourable treatment by all stakeholders. This study examines the relationship between corporate governance variables and financial performance in the Ethiopian banking industry. The board size, independence, educational level of board and audit committee characteristics were employed as measures of corporate and return on assets (ROA) and return on equity (ROE) as financial performance metrics. The study involves a census of all major financial institutions supervised by the National Bank of Ethiopia (NBE) for six years, 2015-2020. The main finding of this study revealed that the existence of board independence, the presence of an audit committee, the financial leverage ratio and financial institution size have a positive significant influence on CFP. Therefore, this study offers an important implication for developing corporate governance and capital structure to support underdeveloped financial institutions. This makes a significant contribution to the existing literature by addressing the specific context of Ethiopian banking industries, filling a gap in knowledge regarding the relationship between corporate governance and financial performance in this sector.

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Section: Introductionmentioning

confidence: 99%

Does the Corporate Governance Practice Support the Corporate Financial Performance of Banking Industries in Ethiopia? Panel Data Analysis

2023

ISEA

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Financial distress situation of financial sectors in Ethiopia: A review paper

Abdu

2022

Cogent Economics & Finance

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Financial inclusion and stability in Ethiopia using bank-level data: A two-step system GMM estimation

Arebo,

Hando,

Mekonnen

2024

F1000Res

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Background This paper examines the impact of financial inclusion on bank stability within Ethiopian context, using panel data from 17 commercial banks over the period 2015-2023. Given the scarcity of research focused on the relationship between financial inclusion and bank stability in Ethiopia, this paper seeks to address a crucial gap by analyzing both conventional and digital aspects of financial inclusion in relation with bank stability. Methods A two-stage principal component analysis (PCA) was conducted to construct a composite financial inclusion index, integrating 10 conventional and 5 digital indicators. The study applied a two-step robust system generalized method of moments (GMM) to examine the effects of financial inclusion on bank stability, complemented by Granger causality testing to examine the directionality of this relationship. Results The result reveals a significant positive effect of financial inclusion on bank stability and Granger causality tests confirms a bi-directional relationship between financial inclusion and stability, indicating that improvements in financial inclusion foster greater stability and vice versa. Our results also highlight that while bank efficiency and GDP growth rate positively effect stability, total assets and income diversification exhibit detrimental effects. Conclusions It is essential to capitalize policy synergies to promote bank stability and to enhance financial inclusion through conventional and digital channels, while carefully managing the implications of risks associated with income diversification and asset distribution. Ensuring inclusive financial system is vital for maintaining bank stability, thus positioning it as a key priority for financial institutions.

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Determinants of Financial Distress in Ethiopia Banking Sector

Cited by 3 publications

References 6 publications

Does the Corporate Governance Practice Support the Corporate Financial Performance of Banking Industries in Ethiopia? Panel Data Analysis

Does the Corporate Governance Practice Support the Corporate Financial Performance of Banking Industries in Ethiopia? Panel Data Analysis

Financial distress situation of financial sectors in Ethiopia: A review paper

Financial inclusion and stability in Ethiopia using bank-level data: A two-step system GMM estimation

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