Assistant Professor, Department of Accounting and Finance, College of Business and Economics, Jimma University, Jimma, Ethiopia, dnltls2@gmail.com/dtolesa@yahoo.com
Online published on 15 February, 2019.
The major aim of the paper was to identify factors that determine liquidity of commercial banks in Ethiopia. A balanced panel data incorporating five bank specific and three macroeconomic variables for the period of 2000 to 2012 were considered. Fixed effect or random effect estimation techniques were employed based on the diagnosis tests made and nature of dependent variables. The researcher has found Ethiopian commercial banks’ liquidity increases with the increase of their capital share in total assets and improvement of their asset quality. In contrary, it is found that the increase of banks profitability, its risk taking behavior, opportunity cost of holding liquid assets and advancement of the economy adversely affect commercial banks’ liquidity position. The impact of bank size on liquidity is somewhat inconsistent and it is advisable to conduct further study by grouping banks based on their size.
Commercial banks, determinants, liquidity
