Panel Data Analysis on the Impact of Industry and Macroeconomic Factors on Bank Performance : The Case of Ethiopia

The study has investigated one of the key research question: how do external factors relate to bank performance? It has set a panel regression model that comprised explanatory variables from the macroeconomic and the banking sector. It has run a regression model based on three dependent performance measures, two of which were related to profit and the rest was a price model. The selected variables have established a relationship with performance in most of the models. The result witnessed the fact that bank performance is determined by factors beyond the management control. These include the macroeconomic situations like economic growth and trade balance. In addition, industry related variables such as the rate of market growth and access to cost saving deposits have impact on performances. Therefore, the study has rejected the hypothesis that external factors (macroeconomic and sector) have no impact on performances