The effect of financial innovations on profitability of commercial banks of Ethiopia

Inhaltsverzeichnis (Table of Contents)

• Chapter One
  • 1.1 Introduction
  • 1.1.1 Financial Innovation in Global Context
  • 1.1.2 Financial innovation in Ethiopia Context
  • 1.2 Statement of the Problem
  • 1.3 Research Questions of the Study
  • 1.4 Objectives of the Study
  • 1.4.1 General Objectives of the study
  • 1.4.2 Specific Objectives of the Study
  • 1.5 Hypothesis Testing of the Study
  • 1.6 Scope of the Study
  • 1.7 Significant of the Study
  • 1.8 Limitations of the Study
  • 1.9 Organization of the Study
  • 1.10 Definition of Key Terms
• Chapter Two
  • 2.1 Introduction
  • 2.2 Concept of Financial Innovation
  • 2.2.1 Categorization of Financial Innovation
  • 2.2.2 Types of Innovations
  • 2.2.3 Financial innovation in Ethiopia
  • 2.2.4 Innovations and Banking profitability
  • 2.2.5 Growth in profitability
  • 2.2.6 Factors that affect Innovation on Bank Profitability
  • 2.3 Theoretical Review on Innovation
  • 2.3.1 Schumpeter Theory of Innovation
  • 2.3.2 Innovation Diffusion Theory
  • 2.3.3 Financial Intermediation Theory
  • 2.3.4 Task-technology fit (TTF) theory
  • 2.3.5 Regulation Innovation Theory
  • 2.3.6 Transaction Cost Innovation Theory
  • 2.4 Empirical of the Study
  • 2.5 Research Gap
  • 2.6 Conceptual Framework
• Chapter Three
  • 3.1 Research Methodology
  • 3.2 Research Design
  • 3.3 Research Approach
  • 3.4 Population of the Study
  • 3.5 Sample Size
  • 3.6 Data Collection and Procedure
  • 3.7 Data Analysis
  • 3.8 Model Specification and Analysis
• Chapter Four
  • 4.0 Result and Discussion
  • 4.1 Introduction
  • 4.2 Descriptive Statistics
  • 4.3 Correlation of the Variables
  • 4.4 Diagnostic Testing
  • 4.5 Hausman Diagnostic Test
  • 4.6 LM Test
  • 4.7 Random Effects Model Regression
  • 4.8 Regression Result analysis
  • 4.9 Test of Hypothesis
  • 4.10 Chapter summery
• Chapter Five
  • 5.1 Introduction
  • 5.2 Conclusions of major Findings
  • 5.3 Contribution of the study
  • 5.4 Recommendation
  • 5.5 Suggestion for Further Studies

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This study aims to examine the effect of financial innovations on the profitability growth of commercial banks in Ethiopia. It investigates the impact of product innovation, bank-specific factors, and macroeconomic factors on this growth. The research utilizes quantitative methods and secondary data from 12 selected Ethiopian banks between 2016 and 2019.

• The impact of financial innovation on bank profitability in Ethiopia.
• The role of product innovation in enhancing bank profitability.
• The influence of bank-specific and macroeconomic factors on profitability growth.
• The effectiveness of various financial innovations (e.g., mobile banking, ATMs) in boosting profitability.
• Recommendations for improving profitability through the adoption of financial innovations.

Zusammenfassung der Kapitel (Chapter Summaries)

Chapter One: This introductory chapter sets the stage for the research by providing context on financial innovation globally and specifically within Ethiopia. It highlights the problem of limited financial innovation adoption in the Ethiopian banking sector and clearly states the research questions and objectives. The scope and limitations of the study are carefully defined, emphasizing the focus on commercial banks and the time period analyzed. The chapter concludes by outlining the structure of the thesis and defining key terms relevant to the study, ensuring a solid foundation for the subsequent chapters.

Chapter Two: This chapter delves into a comprehensive theoretical review of financial innovation. It explores various categorizations and types of financial innovations, including their specific application in the Ethiopian context. The chapter critically examines the existing literature on the relationship between innovation and banking profitability, analyzing relevant theories like Schumpeter's theory of innovation, innovation diffusion theory, and financial intermediation theory. Further, it explores the Task-technology fit (TTF) theory, Regulation Innovation Theory, and Transaction Cost Innovation Theory. The chapter identifies gaps in existing research and presents a conceptual framework that guides the subsequent empirical analysis.

Chapter Three: This chapter meticulously details the research methodology employed in the study. It outlines the research design, approach (quantitative), and the rationale behind the selection of a purposive sampling technique to choose 12 banks. The data collection procedures and the methods used for data analysis, including descriptive and inferential statistics and multiple regression analysis using STATA 14 software, are explicitly described. The chapter concludes by providing a clear explanation of the model specification and analysis, including variable selection and justification for the chosen statistical techniques.

Chapter Four: This chapter presents the results of the empirical analysis, starting with descriptive statistics providing an overview of the data. It then moves on to correlation analysis between the variables, diagnostic testing to assess the model's validity, and the application of the Hausman and LM tests to determine the appropriate regression model (random effects). Finally, the regression results are thoroughly analyzed, testing the hypotheses and interpreting the significance and effect size of the variables on profitability growth. A summary of the chapter's key findings is also presented.

Schlüsselwörter (Keywords)

Product innovation; Bank Specific Factors; Macro-Economic Factors; Profitability Growth; Commercial Banks in Ethiopia; Stata; Financial Innovation; Banking Profitability; Ethiopia; Regression Analysis; Quantitative Research.

Frequently Asked Questions: Effect of Financial Innovations on the Profitability Growth of Commercial Banks in Ethiopia

What is the main focus of this research?

This research examines the impact of financial innovations on the profitability growth of commercial banks in Ethiopia. It investigates the role of product innovation, bank-specific factors, and macroeconomic factors in this growth.

What methodology is used in this study?

The study employs a quantitative research approach using secondary data from 12 selected Ethiopian commercial banks between 2016 and 2019. Data analysis involves descriptive and inferential statistics, and multiple regression analysis using STATA 14 software.

What are the key themes explored in the research?

Key themes include the impact of financial innovation on bank profitability in Ethiopia; the role of product innovation in enhancing bank profitability; the influence of bank-specific and macroeconomic factors on profitability growth; and the effectiveness of various financial innovations (e.g., mobile banking, ATMs) in boosting profitability.

What are the key findings of the study (summarized)?

Chapter Four presents the results, beginning with descriptive statistics and correlation analysis. Diagnostic testing, including the Hausman and LM tests, informs the choice of regression model. The regression results analyze the significance and effect size of variables on profitability growth. Chapter Five presents conclusions, contributions, recommendations, and suggestions for future research.

What is the structure of the research?

The research is structured into five chapters. Chapter One provides an introduction, research questions, objectives, and definitions. Chapter Two reviews the relevant literature on financial innovation and banking profitability. Chapter Three details the research methodology. Chapter Four presents the empirical results and discussion. Chapter Five concludes the study with findings, contributions, and recommendations.

What theoretical frameworks are used?

The study draws upon several theoretical frameworks including Schumpeter's theory of innovation, innovation diffusion theory, financial intermediation theory, Task-technology fit (TTF) theory, Regulation Innovation Theory, and Transaction Cost Innovation Theory.

What are the limitations of the study?

The study's limitations are discussed in Chapter One and may include, but are not limited to, the specific sample of banks selected and the time period analyzed.

What are the key variables examined?

Key variables include measures of financial innovation (product innovation), bank-specific factors, macroeconomic factors, and profitability growth. Specific variables are detailed in the methodology and results chapters.

What software was used for data analysis?

STATA 14 software was used for the statistical analysis in this study.

What type of data was used?

The study uses secondary data from 12 selected Ethiopian commercial banks.