Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks

Sitina Akmel Surur; Kirubel Asegdew Yimenu

doi:doi:10.11648/j.jfa.20180606.11

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Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks

Sitina Akmel Surur, Kirubel Asegdew Yimenu

Published in Journal of Finance and Accounting (Volume 6, Issue 6)

Received: 18 October 2018 Accepted: 9 November 2018 Published: 18 December 2018

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Abstract

Financing mix explains the way a firm finances its asset. Decision on banks financing mix is one of the challenging and debatable issues, but it is also a vital decision for their profitability and continued survival. By considering the imperative role of banks in the economy, this study was conducted to examine the effect of financing mix on financial performance of Ethiopian commercial banks for the period of 2005-2016. Out of eighteen (18) banks operating in Ethiopia, nine (9) of them were used in the study, considering the availability of data in the study period. Three models were used based on measure of financial performance; net interest margin, return on capital employed and return on equity. Whereas, debt to asset and debt to equity are used to measure financing mix and size was used as a control variable. The study adopted explanatory research design with quantitative research approach. The data collected from secondary source (audited annual reports) of sampled firms was analyzed through multiple regression technique, specifically, generalized linear model. The study revealed that financial performance indicators were negatively and significantly affected by capital structure proxies except return on equity, which was positively and significantly affected by debt to equity. The overall results indicated that financial performance of Ethiopian commercial banks was adversely affected by their financing decision and are not at tradeoff as well, which may lead to future bankruptcy.

Published in	Journal of Finance and Accounting (Volume 6, Issue 6)
DOI	10.11648/j.jfa.20180606.11
Page(s)	134-140
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Financing Mix, Financial Performance, Trade-off Theory, Bankruptcy

References

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APA Style

Sitina Akmel Surur, Kirubel Asegdew Yimenu. (2018). Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks. Journal of Finance and Accounting, 6(6), 134-140. https://doi.org/10.11648/j.jfa.20180606.11

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ACS Style

Sitina Akmel Surur; Kirubel Asegdew Yimenu. Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks. J. Finance Account. 2018, 6(6), 134-140. doi: 10.11648/j.jfa.20180606.11

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AMA Style

Sitina Akmel Surur, Kirubel Asegdew Yimenu. Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks. J Finance Account. 2018;6(6):134-140. doi: 10.11648/j.jfa.20180606.11

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@article{10.11648/j.jfa.20180606.11,
  author = {Sitina Akmel Surur and Kirubel Asegdew Yimenu},
  title = {Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks},
  journal = {Journal of Finance and Accounting},
  volume = {6},
  number = {6},
  pages = {134-140},
  doi = {10.11648/j.jfa.20180606.11},
  url = {https://doi.org/10.11648/j.jfa.20180606.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20180606.11},
  abstract = {Financing mix explains the way a firm finances its asset. Decision on banks financing mix is one of the challenging and debatable issues, but it is also a vital decision for their profitability and continued survival. By considering the imperative role of banks in the economy, this study was conducted to examine the effect of financing mix on financial performance of Ethiopian commercial banks for the period of 2005-2016. Out of eighteen (18) banks operating in Ethiopia, nine (9) of them were used in the study, considering the availability of data in the study period. Three models were used based on measure of financial performance; net interest margin, return on capital employed and return on equity. Whereas, debt to asset and debt to equity are used to measure financing mix and size was used as a control variable. The study adopted explanatory research design with quantitative research approach. The data collected from secondary source (audited annual reports) of sampled firms was analyzed through multiple regression technique, specifically, generalized linear model. The study revealed that financial performance indicators were negatively and significantly affected by capital structure proxies except return on equity, which was positively and significantly affected by debt to equity. The overall results indicated that financial performance of Ethiopian commercial banks was adversely affected by their financing decision and are not at tradeoff as well, which may lead to future bankruptcy.},
 year = {2018}
}

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TY  - JOUR
T1  - Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks
AU  - Sitina Akmel Surur
AU  - Kirubel Asegdew Yimenu
Y1  - 2018/12/18
PY  - 2018
N1  - https://doi.org/10.11648/j.jfa.20180606.11
DO  - 10.11648/j.jfa.20180606.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 134
EP  - 140
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20180606.11
AB  - Financing mix explains the way a firm finances its asset. Decision on banks financing mix is one of the challenging and debatable issues, but it is also a vital decision for their profitability and continued survival. By considering the imperative role of banks in the economy, this study was conducted to examine the effect of financing mix on financial performance of Ethiopian commercial banks for the period of 2005-2016. Out of eighteen (18) banks operating in Ethiopia, nine (9) of them were used in the study, considering the availability of data in the study period. Three models were used based on measure of financial performance; net interest margin, return on capital employed and return on equity. Whereas, debt to asset and debt to equity are used to measure financing mix and size was used as a control variable. The study adopted explanatory research design with quantitative research approach. The data collected from secondary source (audited annual reports) of sampled firms was analyzed through multiple regression technique, specifically, generalized linear model. The study revealed that financial performance indicators were negatively and significantly affected by capital structure proxies except return on equity, which was positively and significantly affected by debt to equity. The overall results indicated that financial performance of Ethiopian commercial banks was adversely affected by their financing decision and are not at tradeoff as well, which may lead to future bankruptcy.
VL  - 6
IS  - 6
ER  -

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Author Information

Sitina Akmel Surur

Department of Accounting and Finance, Wolkite University, Wolkite, Ethiopia
Kirubel Asegdew Yimenu

Department of Accounting and Finance, Wolkite University, Wolkite, Ethiopia

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APA Style

Sitina Akmel Surur, Kirubel Asegdew Yimenu. (2018). Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks. Journal of Finance and Accounting, 6(6), 134-140. https://doi.org/10.11648/j.jfa.20180606.11

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ACS Style

Sitina Akmel Surur; Kirubel Asegdew Yimenu. Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks. J. Finance Account. 2018, 6(6), 134-140. doi: 10.11648/j.jfa.20180606.11

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AMA Style

Sitina Akmel Surur, Kirubel Asegdew Yimenu. Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks. J Finance Account. 2018;6(6):134-140. doi: 10.11648/j.jfa.20180606.11

Copy | Download

@article{10.11648/j.jfa.20180606.11,
  author = {Sitina Akmel Surur and Kirubel Asegdew Yimenu},
  title = {Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks},
  journal = {Journal of Finance and Accounting},
  volume = {6},
  number = {6},
  pages = {134-140},
  doi = {10.11648/j.jfa.20180606.11},
  url = {https://doi.org/10.11648/j.jfa.20180606.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20180606.11},
  abstract = {Financing mix explains the way a firm finances its asset. Decision on banks financing mix is one of the challenging and debatable issues, but it is also a vital decision for their profitability and continued survival. By considering the imperative role of banks in the economy, this study was conducted to examine the effect of financing mix on financial performance of Ethiopian commercial banks for the period of 2005-2016. Out of eighteen (18) banks operating in Ethiopia, nine (9) of them were used in the study, considering the availability of data in the study period. Three models were used based on measure of financial performance; net interest margin, return on capital employed and return on equity. Whereas, debt to asset and debt to equity are used to measure financing mix and size was used as a control variable. The study adopted explanatory research design with quantitative research approach. The data collected from secondary source (audited annual reports) of sampled firms was analyzed through multiple regression technique, specifically, generalized linear model. The study revealed that financial performance indicators were negatively and significantly affected by capital structure proxies except return on equity, which was positively and significantly affected by debt to equity. The overall results indicated that financial performance of Ethiopian commercial banks was adversely affected by their financing decision and are not at tradeoff as well, which may lead to future bankruptcy.},
 year = {2018}
}

Copy | Download

TY  - JOUR
T1  - Hanging Trade-off at Risk and Its Implication in Ethiopian Commercial Banks
AU  - Sitina Akmel Surur
AU  - Kirubel Asegdew Yimenu
Y1  - 2018/12/18
PY  - 2018
N1  - https://doi.org/10.11648/j.jfa.20180606.11
DO  - 10.11648/j.jfa.20180606.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 134
EP  - 140
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20180606.11
AB  - Financing mix explains the way a firm finances its asset. Decision on banks financing mix is one of the challenging and debatable issues, but it is also a vital decision for their profitability and continued survival. By considering the imperative role of banks in the economy, this study was conducted to examine the effect of financing mix on financial performance of Ethiopian commercial banks for the period of 2005-2016. Out of eighteen (18) banks operating in Ethiopia, nine (9) of them were used in the study, considering the availability of data in the study period. Three models were used based on measure of financial performance; net interest margin, return on capital employed and return on equity. Whereas, debt to asset and debt to equity are used to measure financing mix and size was used as a control variable. The study adopted explanatory research design with quantitative research approach. The data collected from secondary source (audited annual reports) of sampled firms was analyzed through multiple regression technique, specifically, generalized linear model. The study revealed that financial performance indicators were negatively and significantly affected by capital structure proxies except return on equity, which was positively and significantly affected by debt to equity. The overall results indicated that financial performance of Ethiopian commercial banks was adversely affected by their financing decision and are not at tradeoff as well, which may lead to future bankruptcy.
VL  - 6
IS  - 6
ER  -

Copy | Download