Ethiopian Banks at Risk: Size and Loans Impact Capital Adequacy Ratio
The study looked at how different factors affect the amount of money banks need to keep on hand to cover potential losses. They used data from 14 private banks in Ethiopia over five years. The findings showed that bank size, return on equity, and loan to asset ratio can lower the amount of money banks need, while return on assets and loan loss provision can increase it. This means banks should pay attention to their size, how much money they lend compared to what they have, and how much profit they make to make sure they have enough money set aside.