Financial performance of commercial banks in the emerging markets

Wondmagegn Biru Mamo; Habtamu Legese Feyisa; Mekonnen Kumlachew Yitayaw

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Financial performance of commercial banks in the emerging markets

Wondmagegn Biru Mamo , Habtamu Legese Feyisa , Mekonnen Kumlachew Yitayaw

https://doi.org/10.22495/cgobrv5i2sip12

Abstract

In the economic growth of a country, the banking sector plays a significant role (Alam, Rabbani, Tausif, & Abey, 2021). The overall objective of the study is to investigate the financial performance of commercial banks in emerging markets. The study tried to see the impact of governance, exchange rate volatility, trade openness, and internet access on the financial performance of commercial banks in Ethiopia during the years from 2014 to 2019. The study employed a random-effects model using balanced panel data. The result indicated that composite governance index, trade openness, and internet access have a positive and statistically significant effect on the financial performance of commercial banks as measured by their return on assets. However, the exchange rate volatility has a negative and statistically significant effect on the financial performance of commercial banks. On the other hand, the result of bank-specific variables considered in the study such as profit margin, asset utilization, net interest margin, overhead efficiency, and numbers of branches have a positive and statistically significant effect on the financial performance of commercial banks. Contrarily, the equity multiplier ratio has a negative and significant effect on the financial performance of commercial banks.

Keywords: Commercial Bank, Ethiopia, Exchange Rate Volatility, Financial Performance, Governance, Trade Openness

Authors’ individual contribution: Conceptualization — W.B.M. and H.L.F.; Methodology — W.B.M., H.L.F., and M.K.Y.; Formal Analysis — W.B.M., H.L.F., and M.K.Y.; Investigation — W.B.M., H.L.F., and M.K.Y.; Resources — W.B.M., H.L.F., and M.K.Y.; Writing — Original Draft — W.B.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G21, G38, C33, L25

Received: 14.09.2021
Accepted: 11.01.2022
Published online: 14.01.2022

How to cite this paper: Mamo, W. B., Feyisa, H. L., & Yitayaw, M. K. (2021). Financial performance of commercial banks in the emerging markets [Special issue]. Corporate Governance and Organizational Behavior Review, 5(2), 244–257. https://doi.org/10.22495/cgobrv5i2sip12

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