This study is aimed to test the effect of e-banking on the profitability of commercial banks in Ethiopia during the period 2011-2015. The study sample consists of six commercial banks in Ethiopia.
Percentages are used to test the effect on profitability; these percentages are Return on Assets and Return on Equity as profitability measures. Other used as independent variables are: ATM, Debit cards, and POS. Regression analysis is used to test the effect of e-banking services on the Profit .The regression analysis showed that there is positive effect of e-banking services on the profitability of commercial banks in terms of ROA, and ROE.
The last decade of the 20th century witnessed profound technological changes among which is the advent of electronic commerce, or the exchange of products and services and payments via telecommunication systems consequently according to Gunasekaran and Love (1999) most industries have been influenced, in one way or another, by this promising new technology. In addition to that according toJyotiVijet al, (2014) the new millennium has opened a plethora of opportunities in information technology and has made tremendous impact in Banking. The business environment globally has changed and it has been characterized by stiff competition among the players and the banking industry is no exception.
Table of Contents
Chapter One: Introduction
1.1. Background of the Study
1.2 E-Banking History in Ethiopia
1.3. Statement of the Problem
1.4 Objectives of the Study
1.4.1 General Objective
1.4.2. Specific Objective
1.6 Significance of the Study
Chapter Two: Review of Related Literature
Introduction
2.1 Theoretical Review
2.1.1 Definition of E- Banking
2.2. The Concept of E-Banking
2.3. Economic Rationale of E-Banking
2.4. Technology- Organization- Environment (TOE) Framework
2.4.1 Technological Factors
2.4.2. Organizational Factors
2.4.3 Environmental Factors
2.5. Technology Acceptance Model
2.6. Innovation Diffusion Theory
2.8. Type of Electronic Banking
2.8.1 Mobile Banking
2.8.2. Internet Banking
2.8.3. Telephone Banking
2.8.4. ElectronicCard
2.8.5. Automated Teller Machine (ATM)
2.8.6. Point of Sale (POS)
2.9. Empirical Literature
2.10. Benefits of Electronic Banking
2.11. Bank Performance Indicators
2.11.1. Return on Equity (ROE)
2.11.2. Return on Asset (ROA)
2.12. Control Variables
2.12.1Liquidity Management
2.12.2. Bank Size
2.13. Conceptual Framework
Chapter 3: Research Approach and Methodology
3.1 Introduction
3.2 Research Approach
3.3 Research Method
3.4 Research design
3.5. Sample & Population
3.5 Data Type and Source
3.6. Method of Data Analysis
3.7. Controlled Variables
3.8. Empirical Model
3.9 Model Assumptions
Chapter Four: Results and Discussions
4.1 Introduction
4.2. Descriptive Statistics
4.3 Testing the Classical Linear Regression Model (CLRM) Assumptions
4.3.1. The Assumption of Average Value of the Error is Zero
4.3.2. Heteroskedasticity
4.3.3. The Assumption of Autocorrelation
4.3.4. The Assumption of Disturbances are normally Distributed
4.4.4. Correlation Matrix and Multicollinearity
4.5. Fixed Effect versus Random Effect Model
4.6. Results of Regression Analysis
Chapter Five: Conclusion and Recommendation
5.1. Conclusion
5.2. Recommendations
5.3 Further Research
Research Objective and Scope
The primary objective of this research is to empirically examine the effect of electronic banking services (specifically ATM, POS, and Debit cards) on the financial performance of selected commercial banks in Ethiopia during the period 2011-2015, utilizing Return on Assets (ROA) and Return on Equity (ROE) as key performance metrics.
- Quantitative analysis of e-banking impact on bank profitability in the Ethiopian context.
- Evaluation of electronic delivery channels including ATM, POS, and Debit cards.
- Application of multiple regression models to test the influence of technology on bank financial indicators.
- Analysis of control variables such as bank size and liquidity management in relation to performance.
- Assessment of existing technology adoption frameworks and their relevance to Ethiopian commercial banks.
Excerpt from the Book
2.8.5. Automated Teller Machine (ATM)
Automated Teller Machine (ATM) is a device, which offers a range of services to users that are authorized by using a PIN-code. From a cash ATM, user is able to make payments, withdraw money or view account information (Myllynen, 2009).
ATMs have reduced costs per transaction to almost one-fourth as compared to almost the branches. ATMs support a variety of transactions such as cash withdrawal, cash deposits and placement of service requests, including the request for a new cheque book. New technology has facilitated the installation of ATMs in shopping malls or busy commercial localities and has further reduced the transaction and operation costs for banks (Sambamuthy et al., 2010).
The ATMs were one of the first ICT technologies to be used by banks and it has remained one of the most successful. The ATM is a computerized telecommunication device that provides bank customers with self-service access to their financial accounts. A prototype was first created in 1939, a modern ATM was patented in 1966, an ATM was installed in Barclays Bank in London in 1967 and the United States started productizing ATMs in 1968 (Bellis, 2010).
Summary of Chapters
Chapter One: Introduction: This chapter introduces the study's background, the evolution of e-banking in Ethiopia, the research problem, and defines the research objectives and hypotheses.
Chapter Two: Review of Related Literature: This section provides a comprehensive review of theoretical frameworks and empirical studies concerning electronic banking and its impact on bank performance globally and in developing countries.
Chapter 3: Research Approach and Methodology: This chapter outlines the quantitative research methodology, data collection sources, sampling techniques, and the empirical models used for regression analysis.
Chapter Four: Results and Discussions: This chapter presents the empirical findings, including descriptive statistics and the results of the regression analysis conducted to test the research hypotheses.
Chapter Five: Conclusion and Recommendation: This final chapter synthesizes the main research findings and provides recommendations for bank management and policy makers regarding e-banking adoption.
Keywords
Electronic banking, ROA, ROE, ATM, POS, Debit cards, Commercial Banks, Ethiopia, Financial Performance, Regression Analysis, Technology Adoption, ICT, Profitability, Liquidity Management, Bank Size
Frequently Asked Questions
What is the core focus of this research project?
The project investigates the quantitative impact of electronic banking services, such as ATMs, POS terminals, and debit cards, on the financial profitability of selected commercial banks in Ethiopia.
Which performance metrics are used to measure bank success?
The study primarily utilizes Return on Assets (ROA) and Return on Equity (ROE) as the two main indicators of a bank's financial performance.
What is the primary research question?
The research seeks to determine whether the adoption of e-banking technologies leads to improved financial performance, specifically in terms of profitability for Ethiopian commercial banks.
What research methodology was employed?
The study uses a quantitative research approach, applying multiple regression models to balanced panel data collected from six selected commercial banks between 2011 and 2015.
What are the key themes addressed in the literature review?
The literature review covers the Technology-Organization-Environment (TOE) framework, the Technology Acceptance Model (TAM), and Innovation Diffusion Theory, alongside existing empirical evidence from various countries.
Which specific independent variables characterize this study?
The independent variables are the number of POS terminals, the number of ATMs, and the usage of debit cards, supplemented by control variables including bank size and liquidity.
How did the study address the assumption of normality for its regression models?
The researcher utilized the Bera-Jarque (BJ) normality test to ensure that the residuals of the models were consistent with a normal distribution assumption.
What was the key finding regarding the impact of ATM usage?
The study found that the number of ATMs has a statistically significant positive relationship with both the Return on Equity (ROE) and Return on Assets (ROA) of the commercial banks studied.
Did debit card usage show a significant impact on bank performance?
The findings indicated that, unlike ATMs and POS terminals, the number of debit cards did not have a statistically significant effect on the profitability measures (ROA and ROE) in the tested models.
What is the main policy recommendation provided by the author?
The author recommends that the National Bank of Ethiopia facilitate capacity building and provide incentives for banks to invest in ICT to promote e-banking, as it contributes positively to bank profitability and shareholder wealth.
- Arbeit zitieren
- Besufkad Gebre (Autor:in), 2017, The Effects of E-Banking on Bank Performance. The Case of Selected Ethiopian Commercial Banks, München, GRIN Verlag, https://www.grin.com/document/999910
