Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks

Jundi Mohammed Yusuf; Anwar Adem Shikur

doi:doi:10.11648/j.ijfbr.20230904.11

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Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks

Jundi Mohammed Yusuf, Anwar Adem Shikur

Published in International Journal of Finance and Banking Research (Volume 9, Issue 4)

Received: 8 August 2023 Accepted: 30 August 2023 Published: 6 September 2023

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Abstract

Profitability is the basic aim of establishing a business, and banks are not exceptions. Thus, the main objective of the study is to examine the impact of bank regulations on the performance of commercial banks in Ethiopia. The panel data was collected from an audited financial statement of nine commercial banks for eleven consecutive years, 2011–2021. The study employed a quantitative research approach to documentary analysis. The study used a fixed effect model on the regression analysis and used E-View10 software. Return of Asset (ROA) was used as a dependent variable. While the statutory reserve requirements, legal reserve requirements, minimum capital requirement, credit risk, capital adequacy, and inflation as independent variables. The regression result revealed that legal reserve requirements, capital adequacy, and inflation had a positive and significant effect on the performance of selected commercial banks. Moreover, the statutory Reserve requirements were found to have a positive but insignificant impact on the bank's performance. On the other hand, minimum capital requirements and credit risk were found to have a negative and significant impact on the performance of selected commercial banks. The study recommended that the National Bank of Ethiopia (NBE) and other regulatory bodies follow and update reserve requirements, inflation, real GDP growth, capital requirements, and other regulations while considering the short and long-term The long-term impact of such policy changes on overall economic performance and commercial Banks in Ethiopia are also recommended to improve their capital growth and analyses the borrowers’ creditworthiness before lending out funds, and consider the deposit interest rate and sensitivity of customers to such change against inflation.

Published in	International Journal of Finance and Banking Research (Volume 9, Issue 4)
DOI	10.11648/j.ijfbr.20230904.11
Page(s)	58-67
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

ROA, Bank Regulations, Commercial Banks, Performance, Ethiopia

References

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APA Style

Jundi Mohammed Yusuf, Anwar Adem Shikur. (2023). Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks. International Journal of Finance and Banking Research, 9(4), 58-67. https://doi.org/10.11648/j.ijfbr.20230904.11

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ACS Style

Jundi Mohammed Yusuf; Anwar Adem Shikur. Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks. Int. J. Finance Bank. Res. 2023, 9(4), 58-67. doi: 10.11648/j.ijfbr.20230904.11

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AMA Style

Jundi Mohammed Yusuf, Anwar Adem Shikur. Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks. Int J Finance Bank Res. 2023;9(4):58-67. doi: 10.11648/j.ijfbr.20230904.11

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@article{10.11648/j.ijfbr.20230904.11,
  author = {Jundi Mohammed Yusuf and Anwar Adem Shikur},
  title = {Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks},
  journal = {International Journal of Finance and Banking Research},
  volume = {9},
  number = {4},
  pages = {58-67},
  doi = {10.11648/j.ijfbr.20230904.11},
  url = {https://doi.org/10.11648/j.ijfbr.20230904.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20230904.11},
  abstract = {Profitability is the basic aim of establishing a business, and banks are not exceptions. Thus, the main objective of the study is to examine the impact of bank regulations on the performance of commercial banks in Ethiopia. The panel data was collected from an audited financial statement of nine commercial banks for eleven consecutive years, 2011–2021. The study employed a quantitative research approach to documentary analysis. The study used a fixed effect model on the regression analysis and used E-View10 software. Return of Asset (ROA) was used as a dependent variable. While the statutory reserve requirements, legal reserve requirements, minimum capital requirement, credit risk, capital adequacy, and inflation as independent variables. The regression result revealed that legal reserve requirements, capital adequacy, and inflation had a positive and significant effect on the performance of selected commercial banks. Moreover, the statutory Reserve requirements were found to have a positive but insignificant impact on the bank's performance. On the other hand, minimum capital requirements and credit risk were found to have a negative and significant impact on the performance of selected commercial banks. The study recommended that the National Bank of Ethiopia (NBE) and other regulatory bodies follow and update reserve requirements, inflation, real GDP growth, capital requirements, and other regulations while considering the short and long-term The long-term impact of such policy changes on overall economic performance and commercial Banks in Ethiopia are also recommended to improve their capital growth and analyses the borrowers’ creditworthiness before lending out funds, and consider the deposit interest rate and sensitivity of customers to such change against inflation.},
 year = {2023}
}

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TY  - JOUR
T1  - Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks
AU  - Jundi Mohammed Yusuf
AU  - Anwar Adem Shikur
Y1  - 2023/09/06
PY  - 2023
N1  - https://doi.org/10.11648/j.ijfbr.20230904.11
DO  - 10.11648/j.ijfbr.20230904.11
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 58
EP  - 67
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20230904.11
AB  - Profitability is the basic aim of establishing a business, and banks are not exceptions. Thus, the main objective of the study is to examine the impact of bank regulations on the performance of commercial banks in Ethiopia. The panel data was collected from an audited financial statement of nine commercial banks for eleven consecutive years, 2011–2021. The study employed a quantitative research approach to documentary analysis. The study used a fixed effect model on the regression analysis and used E-View10 software. Return of Asset (ROA) was used as a dependent variable. While the statutory reserve requirements, legal reserve requirements, minimum capital requirement, credit risk, capital adequacy, and inflation as independent variables. The regression result revealed that legal reserve requirements, capital adequacy, and inflation had a positive and significant effect on the performance of selected commercial banks. Moreover, the statutory Reserve requirements were found to have a positive but insignificant impact on the bank's performance. On the other hand, minimum capital requirements and credit risk were found to have a negative and significant impact on the performance of selected commercial banks. The study recommended that the National Bank of Ethiopia (NBE) and other regulatory bodies follow and update reserve requirements, inflation, real GDP growth, capital requirements, and other regulations while considering the short and long-term The long-term impact of such policy changes on overall economic performance and commercial Banks in Ethiopia are also recommended to improve their capital growth and analyses the borrowers’ creditworthiness before lending out funds, and consider the deposit interest rate and sensitivity of customers to such change against inflation.
VL  - 9
IS  - 4
ER  -

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Author Information

Jundi Mohammed Yusuf

Department of Accounting and Finance, Dire Dawa University, Dire Dawa, Ethiopia
Anwar Adem Shikur

Research Center for Islamic Economics and Finance, Sakarya University, Sakarya, Turkiye

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APA Style

Jundi Mohammed Yusuf, Anwar Adem Shikur. (2023). Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks. International Journal of Finance and Banking Research, 9(4), 58-67. https://doi.org/10.11648/j.ijfbr.20230904.11

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ACS Style

Jundi Mohammed Yusuf; Anwar Adem Shikur. Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks. Int. J. Finance Bank. Res. 2023, 9(4), 58-67. doi: 10.11648/j.ijfbr.20230904.11

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AMA Style

Jundi Mohammed Yusuf, Anwar Adem Shikur. Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks. Int J Finance Bank Res. 2023;9(4):58-67. doi: 10.11648/j.ijfbr.20230904.11

Copy | Download

@article{10.11648/j.ijfbr.20230904.11,
  author = {Jundi Mohammed Yusuf and Anwar Adem Shikur},
  title = {Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks},
  journal = {International Journal of Finance and Banking Research},
  volume = {9},
  number = {4},
  pages = {58-67},
  doi = {10.11648/j.ijfbr.20230904.11},
  url = {https://doi.org/10.11648/j.ijfbr.20230904.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20230904.11},
  abstract = {Profitability is the basic aim of establishing a business, and banks are not exceptions. Thus, the main objective of the study is to examine the impact of bank regulations on the performance of commercial banks in Ethiopia. The panel data was collected from an audited financial statement of nine commercial banks for eleven consecutive years, 2011–2021. The study employed a quantitative research approach to documentary analysis. The study used a fixed effect model on the regression analysis and used E-View10 software. Return of Asset (ROA) was used as a dependent variable. While the statutory reserve requirements, legal reserve requirements, minimum capital requirement, credit risk, capital adequacy, and inflation as independent variables. The regression result revealed that legal reserve requirements, capital adequacy, and inflation had a positive and significant effect on the performance of selected commercial banks. Moreover, the statutory Reserve requirements were found to have a positive but insignificant impact on the bank's performance. On the other hand, minimum capital requirements and credit risk were found to have a negative and significant impact on the performance of selected commercial banks. The study recommended that the National Bank of Ethiopia (NBE) and other regulatory bodies follow and update reserve requirements, inflation, real GDP growth, capital requirements, and other regulations while considering the short and long-term The long-term impact of such policy changes on overall economic performance and commercial Banks in Ethiopia are also recommended to improve their capital growth and analyses the borrowers’ creditworthiness before lending out funds, and consider the deposit interest rate and sensitivity of customers to such change against inflation.},
 year = {2023}
}

Copy | Download

TY  - JOUR
T1  - Bank Regulations and Firm Performance: In the Case of Ethiopian Commercial Banks
AU  - Jundi Mohammed Yusuf
AU  - Anwar Adem Shikur
Y1  - 2023/09/06
PY  - 2023
N1  - https://doi.org/10.11648/j.ijfbr.20230904.11
DO  - 10.11648/j.ijfbr.20230904.11
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 58
EP  - 67
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20230904.11
AB  - Profitability is the basic aim of establishing a business, and banks are not exceptions. Thus, the main objective of the study is to examine the impact of bank regulations on the performance of commercial banks in Ethiopia. The panel data was collected from an audited financial statement of nine commercial banks for eleven consecutive years, 2011–2021. The study employed a quantitative research approach to documentary analysis. The study used a fixed effect model on the regression analysis and used E-View10 software. Return of Asset (ROA) was used as a dependent variable. While the statutory reserve requirements, legal reserve requirements, minimum capital requirement, credit risk, capital adequacy, and inflation as independent variables. The regression result revealed that legal reserve requirements, capital adequacy, and inflation had a positive and significant effect on the performance of selected commercial banks. Moreover, the statutory Reserve requirements were found to have a positive but insignificant impact on the bank's performance. On the other hand, minimum capital requirements and credit risk were found to have a negative and significant impact on the performance of selected commercial banks. The study recommended that the National Bank of Ethiopia (NBE) and other regulatory bodies follow and update reserve requirements, inflation, real GDP growth, capital requirements, and other regulations while considering the short and long-term The long-term impact of such policy changes on overall economic performance and commercial Banks in Ethiopia are also recommended to improve their capital growth and analyses the borrowers’ creditworthiness before lending out funds, and consider the deposit interest rate and sensitivity of customers to such change against inflation.
VL  - 9
IS  - 4
ER  -

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