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Factors Affecting the Capital Adequacy Ratio of Private Banks in Ethiopia
The objective of the study was to assess the factors affecting the capital adequacy ratio of the private banks in Ethiopia. Data was gathered from the financial documents of all 16 private banks in Ethiopia over eight years, from 2013 to 2020. The independent variables were ROA, ROE, bank size in terms of total asset, loan loss provision to total loan, total capital to total asset, total debt to total equity, and liquid asset to total asset. The dependent variable was the capital adequacy ratio. The random-effects model was used, based on the Hausman test of a specification, to analyse the panel data regression model. The result indicated that ROA, bank size in terms of total asset, total capital to total asset, total debt to total equity, and liquid asset to total asset were statistically significant, at a 5% level of significance, in affecting the capital adequacy ratio of the private banks in Ethiopia.
Capital Adequacy, Panel Data, Random Effect, Commercial Banks, Ethiopia
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