College of Business and Economics
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The College of Business and Economics promotes excellence in teaching, research, and community engagement
in the fields of business, economics, management, and development studies.
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Item THE EFFECT OF LOAN DELINQUENCY ON FINANCIAL PERFORMANCE OF MICRO FINANCE INSTITUTION IN ETHIOPIA(HAWASSA UNIVERSITY, 2024-03) ASAYE KONTAMOThis study examines the impact of loan delinquency on the financial performance of 11 microfinance institutions in Ethiopia from 2008 to 2021. Using a quantitative research approach with an explanatory research design, the researcher employs regression analysis to investigate the determinants of return on assets (ROA). The findings align with prior research, showing a negative relationship between nonperforming loans (NPL) and ROA. Higher NPLs indicate increased credit risk and potential losses, consistent with theoretical expectations and previous studies. Similarly, a negative relationship is found between credit to deposit ratio (CDR) and ROA, suggesting that greater reliance on credit for funding is associated with higher risk and potentially lower profitability. However, the positive coefficients on capital adequacy (CA) and firm size (FS) confirm prior research indicating that well-capitalized and larger entities perform better financially. Surprisingly, the loan loss provision ratio (LLP) and cost per asset ratio (CPL) were found to be statistically insignificant in determining ROA. These results imply that the significance of these variables may be context-specific or subject to variations across industries or time periods. This study contributes to the understanding of the relationship between loan delinquency and financial performance in the Ethiopian microfinance sectorItem DETERMINANTS OF PROFITABILITY IN ETHIOPIAN PRIVATE COMMERCIAL BANKS: EVIDENCE FROM 2017–2023(HAWASSA UNIVERSITY, 2025-05) TEMESGEN TESFAYEThe major objective of this study was to examine both bank-specific factors, such as capital adequacy, liquidity, bank size, bank age, asset tangibility and leverage, as well as macroeconomic variables, including GDP growth and inflation, to determine their impact on profitability, as measured by Return on Assets (ROA). The research employed a quantitative approach, and used both descriptive and explanatory research designs to analyze panel data from five private commercial banks. The banks were Awash Bank, Abyssinia Bank, Dashen Bank, Nib Bank, and Zemen Bank and studied over the period from 2017 to 2023. Secondary data were obtained from the audited financial statements of the selected banks and macroeconomic reports from the National Bank of Ethiopia (NBE). The analysis employed EViews 9 software for regression analysis, revealing significant relationships between various factors and profitability, measured by Return on Assets (ROA).Various diagnostic tests, including multicollinearity, heteroscedasticity, normality, and autocorrelation, were conducted to ensure the reliability of the Ordinary Least Squares (OLS) regression model. The study finds indicate that bank size significantly increased ROA by effect size of 7.9% (β = 0.079, p = 0.007), while liquidity positively influenced profitability, with an increase of 11.9% (β = 0.119, p = 0.038). Additionally, leverage showed a positive impact, enhancing ROA by 2.2% (β = 0.022, p = 0.005). Asset tangibility was positively correlated with profitability, although not statistically significant (β = 1.638, p = 0.165). The study also found that GDP growth had a positive effect size on profitability (β = 1.967, p = 0.028), while inflation was inversely related to ROA, though not significantly affect financial performance. Accordingly, the study suggests that private banks need to work on their capital structure and asset management strategies. Managing liquidity to grow stability and profitability and managing debt to reduce financial risk are important. Also, regulators have the responsibility to generate an environment of low inflation and maintained stability in the economy that permits the banking sector to develop. This study adds to the literature on Ethiopian banking profitability and will be useful to policy makers, banks, and researchers in the future.Item THE EFFECT OF LOAN DELINQUENCY ON FINANCIAL PERFORMANCE OF MICRO FINANCE INSTITUTION IN ETHIOPIA(Hawassa University, 2024-03) ASAYE KONTAMOThis study examines the impact of loan delinquency on the financial performance of 11 microfinance institutions in Ethiopia from 2008 to 2021. Using a quantitative research approach with an explanatory research design, the researcher employs regression analysis to investigate the determinants of return on assets (ROA). The findings align with prior research, showing a negative relationship between nonperforming loans (NPL) and ROA. Higher NPLs indicate increased credit risk and potential losses, consistent with theoretical expectations and previous studies. Similarly, a negative relationship is found between credit to deposit ratio (CDR) and ROA, suggesting that greater reliance on credit for funding is associated with higher risk and potentially lower profitability. However, the positive coefficients on capital adequacy (CA) and firm size (FS) confirm prior research indicating that well-capitalized and larger entities perform better financially. Surprisingly, the loan loss provision ratio (LLP) and cost per asset ratio (CPL) were found to be statistically insignificant in determining ROA. These results imply that the significance of these variables may be context-specific or subject to variations across industries or time periods. This study contributes to the understanding of the relationship between loan delinquency and financial performance in the Ethiopian microfinance sector.