Abstract:
Liquidity creation is the main concerns of commercial banks because banks are mainly
involved in deposit mobilizing and lending which have direct impact on their liquidity.
Hence, this study examines determinants of commercial banks liquidity in Ethiopian. The
data covered the period from 2000-2018 G.C for the sample of selected seven commercial
banks. Quantitative research approach and explanatory Research design were adopted in
carrying out this research. Secondary data were collected from the selected seven
commercial banks using purposive sampling technique and macro- economic data are
collected from Ministry of Finance and Economic Development (MOFED). The study used
both descriptive and inferential statistics. Mean and standard deviation were used as
descriptive statistics, where as correlation and panel regressions were used from inferential
statistics using Eviews-9.The findings of the study shows that Loan growth, Inflation, Nonperforming loan gross domestic product, and Bank size have negative and statistically
significant impact on liquidity. Interest rate spread, and asset quality have positive and
statistically significant impact on liquidity. The study suggests that focusing and
reengineering the banks alongside the key internal drivers could enhance the liquidity
position of the commercial banks in Ethiopia. Moreover, banks in Ethiopia should not only
be concerned about internal structures and policies, but they must consider both the internal
environment and the macroeconomic environment together in developing strategies to
improve the liquidity position of the banks On the other side the policy maker, NBE has to
consider the existing economic conditions and promote favorable environment to the
development of the financial sector.
