Determinants Of Financial Reporting Quality In Ethiopian Private Banks

Abstract

This study explores the key determinants affecting the quality of financial reporting in Ethiopian private banks. Employing a quantitative research design, data were collected over a ten-year period (2014–2023) from the National Bank of Ethiopia and audited financial statements of ten randomly selected private banks, resulting in 100 firm-year observations. The study investigates financial reporting quality as the dependent variable, measured through relevant financial indicators, while analyzing six firm-specific independent variables: profitability, liquidity, leverage, non-performing loans, auditor changes, and the use of information technology and applying a binary logistic regression model. The empirical analysis reveals that liquidity, profitability, and information technology have a statistically significant and positive relationship with financial reporting quality. In contrast, leverage, non-performing loans and changes in auditors negatively influence financial reporting quality. These findings underscore the critical role of financial stability, technological adoption, and consistent auditing practices in enhancing the transparency and reliability of financial reports. The results suggest that boards of directors in Ethiopian private banks should prioritize these internal factors when designing and improving their financial reporting systems. Additionally, the study provides practical implications for investors, regulators, and policymakers, who should consider these determinants when assessing the credibility of financial information for investment and regulatory purposes. By identifying the variables that significantly influence reporting quality, this research contributes to the literature on corporate financial transparency in emerging markets and offers actionable insights for strengthening financial governance in the Ethiopian banking sector