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Impact of working capital management on profitability of private commercial banks in Ethiopia

Journal of innovation and entrepreneurship, 2024-12, Vol.13 (1), p.23-18

The Author(s) 2024 ;The Author(s) 2024. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;EISSN: 2192-5372 ;DOI: 10.1186/s13731-024-00379-3

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  • Title:
    Impact of working capital management on profitability of private commercial banks in Ethiopia
  • Author: Mengstie, Belay ; Mosisa, Tafa ; Mosisa, Toleshi
  • Subjects: Audited financial statements ; Business and Management ; Commercial banks ; Current liabilities ; Economic Geography ; Economic Policy ; Entrepreneurship ; Financial management ; Private sector ; Profitability ; Working capital ; Working capital management
  • Is Part Of: Journal of innovation and entrepreneurship, 2024-12, Vol.13 (1), p.23-18
  • Description: Working capital management is an important financial management decision for the profitability of commercial banks. The purpose of this study is to examine the impact of working capital management on commercial banks' profitability. The study used secondary data from audited financial statements of five private commercial banks in Ethiopia covering the period from 2011 to 2020. The banks were selected on a convenience basis. The financial information from the banks was analyzed to determine the impact of the current ratio, bank size, a current asset-to-total asset ratio, loans and advances to total asset ratio, and current liabilities-to-total assets ratios on profitability. The researchers applied descriptive statistics and inferential statistics. The data were analyzed using the Stata data processing package. An econometric model is applied to examine the impact of working capital management on the profitability of commercial banks. A random effect model was employed and the result revealed that bank size and loans and advances to total assets were found to have a significant impact on banks' profitability. The current ratio, a current asset-to-total asset ratio, and current liabilities-to-total assets ratios were found insignificant to influence banks' profitability. Since the profitability of the banks depends on working capital management, rigorous attention should be given to those factors that influence the profitability of commercial banks.
  • Publisher: Berlin/Heidelberg: Springer Berlin Heidelberg
  • Language: English
  • Identifier: EISSN: 2192-5372
    DOI: 10.1186/s13731-024-00379-3
  • Source: Coronavirus Research Database
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
    DOAJ Directory of Open Access Journals
    Springer Nature OA Free Journals
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