The Effect Of Asset And Liability Management On Profitability Of Some Selected Private Commercial Banks In Ethiopia

Abstract

The financial system consists of a variety of institutions, markets and instruments.The main objective of this study was to investigate the effect of asset and liability management on profitability of some selected commercial banks in Ethiopia using panel data of twelve private commercial banks from year 2012 to 2022. The study used quantitative research approach and analyzed using regression models. Moreover, Return on asset was used to measure profitability while Random effect regression model was applied to investigate the effect of operational efficiency, asset quality, capital adequecy, liquidity, GDP, interest rate,saving,demand and fixed deposit on profitability of private commercial banks in Ethiopia. The finding of the study revealed that capital adequecy, liquidity, GDP and interest rate has statistically significant and positive effect on banks profitability.On the other hand,variables like operational efficiency,asset quality and saving deposit has a negative and statistically significant effect on banks profitability. However, the relationship for fixed deposit was found to be statistically insignificant and negative.The study explored that operational efficiency, asset quality,capital adequacy,liquidity,GDP, interest rate,saving and demand deposit, were the key driver of return on asset of banks, Therefore, Bank managers are advised to give due attention to the significant variables to improve profitability