The Effect Of Technological Innovation Uptake On The Financial Performance: The Case Study Of Selected Private Banks In Ethiopia

Abstract

A technological innovation is a new product whose technological characteristics are significantly different from the way they were before. Technological innovation is highly used by the banking sector to create competitive advantage. It helps banks improve their services and become more cost efficient. The aim of conducting this research is to identify the effect of technological innovation on the financial performance of the private selected banks. The study was used secondary data which was collected from the published annual reports of the banks. The collected data were analyzed using Stata software version 15. An econometric regression model was to determine the relationship between technological innovation and financial performance for a period of seven years (2015 – 2021). Both descriptive and inferential statistics were employed, with the random effect regression model applied to panel data using Stata software version 15. The results from the random effect regression model indicated that both bank size and bank liquidity positively and significantly affect financial performance, while internet banking negatively and significantly affect the financial performance of private banks in Ethiopia. The number of mobile banking users and point of sale terminals shows a negative and insignificant effect on bank’s financial performance, the number Automatic teller machine terminals have positive and insignificant effects on financial performance. The study recommends that private banks in Ethiopia should prioritize diversifying their management strategies to optimize financial performance