Department of Accounting and cooperative studies

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    DETERMINANTS OF CREDIT DEFAULT OF MICROFINACE INSTITUTIONS BORROWERS: THE CASE OF MEKELLE CITY, TIGRAY REGION, ETHIOPIA
    (Mekelle University, 2025-09-24) TESFSAY GEBREHIWOT
    Microfinance involves the provision of micro-credit, saving and other services to poor people that are excluded by the commercial bank for collateral and other reasons. The role of microfinance institutions is to serve needy people generally in the region and specifically in the city. This study aims at identifying the major socio-demographic factors, business related, institutional and loan related factors that determine credit default of MFIs borrowers. In fact, identifying and analyzing such determining factors of credit default is vital in the achievement of profitability and sustainability of MFIs. The survey population was divided into defaulters and non-defaulters based on credit repayment performance. In this connection, the researcher collected data from primary and secondary sources. The primary data has been collected by interviewing and using a structured questionnaire from 400 defaulters and non-defaulters’ respondents with the help of trained enumerators. The questionnaire includes both open and closed- ended questions. In addition, secondary data were gathered from Mekelle citifies offices and other related relevant publications. Descriptive statistics with the help of tables and Percentages were used in analyzing the collected data. In addition to this econometric model by employing SPSS versions 16.0 were used to analyze the collected data. Furthermore, a chi-square(X2) test of independence was employed to compare the relationship of dependent variable with independent variables. A total of twelve explanatory variables were included in the regression and the result of the model show that age, education level, family size, other sources of income, and method of lending are significant factors affecting loan repayment in MFIs. In contrast, gender, loan size, business experience, timeliness of loan release, distance from MFI, and suitability of installment period were not significant in predicting repayment performance. Based on the findings of the study, some recommendations were made to improve loan repayment performance in the study area. To improve loan repayment of MFIs interventions should be tailored to borrowers' age, education, and family size, with a focus on providing financial education for those in larger households. Efforts should also prioritize strengthening reliable income sources and financial management skills, particularly for borrowers with informal income streams. Additionally, enhancing group lending mechanisms with better peer monitoring and stricter institutional oversight will help reduce default rates.
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    ANALYSIS OF RELATIONSHIP BETWEEN BANK SPECIFIC FACTORS AND PROFITABILITY: A STUDY ON PRIVATE COMMERCIAL BANKS IN ETHIOPIA
    (Mekelle University, 2025-11-24) TEMESGEN TESFAYE
    This study aimed to examine the impact of bank-specific factors on the financial performance of five selected private commercial banks in Ethiopia. Employing both descriptive and explanatory research designs through a mixed-methods approach, the study utilized primary data collected via questionnaires from top bank managers and secondary data from audited financial statements spanning ten years (2014/2015–2023/2024). Descriptive, correlation, and multiple regression analyses were conducted to interpret the data. The descriptive results indicated that while ROA fluctuated over time, it generally remained stable around the mean; non-performing loans (NPLs) were mostly low, though a few banks showed poor asset quality; and liquidity levels varied but were generally strong. Correlation analysis revealed that ROA had a significant positive relationship with capital adequacy and a significant negative relationship with asset quality. Regression results confirmed that capital adequacy and liquidity positively influenced profitability, whereas asset quality had a negative effect. Based on these findings, the study recommended enhancing systems for managing credit risk, adopting proactive capital and liquidity management frameworks, and strengthening regulatory oversight on asset quality. Finally, it acknowledged certain limitations and proposed areas for future research.
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    Factors Affecting Bank Profitability in Ethiopia: The case of selected commercial banks in Ethiopia
    (Mekelle University, 2025-10-24) Teklay Abraha
    This study analyses the impact of political stability and other customary covariates, namely, bank-specific, industry-specific, and macroeconomic determinants on the profitability of banking sector in Ethiopia using two-step system GMM estimator. The study employed a panel data of 17 commercial banks for the period of 2014 to 2024, consisting of 187 bank-year observations. The regression outcomes reveal that political instability has a negative and statistically significant impact on the profitability of banks in the case of Ethiopia. This means that bank’s profitability declines as the country’s political instability rises. Moreover, the regression results reveal that the profitability of banks in Ethiopia is shaped by other customary variables, which are bank-specific, industry-specific, and macroeconomic variables. The findings are stout and dependable as another model specification is undertaken. To the researcher’s knowledge, the present study is the first to analyses the effect of political stability on the profitability of banks in Ethiopia. As a result, it provides better insights for the policymakers, regulators, bank managers, analysts, and other interested parties to improve the profitability of Ethiopian banks.
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    EXAMINING HOTEL MANAGERS’ FINANCIAL COMPETENCIES: EVIDENCE FROM FOUR-STAR HOTELS IN ADDIS ABABA
    (Mekelle University, 2025-09-24) SISAY TADESSE
    In the current competitive business environment, hotel managers are required to develop a high level of financial competencies to deliver efficiency and effectiveness in their day-to-day activities, which contributes to organizational performance. However, expected hotel managers‘ financial competencies deviate from the actual competencies they acquired through experience and curricular training. As the hotel industry in Addis Ababa, Ethiopia, has experienced rapid growth in recent years, driven by economic expansion, increased conference tourism, and globalization, this research aims to examine what financial management competencies are considered important from the perspective of four-star hotel managers in Addis Ababa. Utilizing a descriptive research design with descriptive data analysis, the study included heads of departments and deputy supervisors from seven selected hotels. Primary data were collected through questionnaires from 72 hotel managers. The managers identified a set of important skills under six core financial competencies: demand forecasting, budgeting, pricing skills, revenue management, cost management, and asset management. Hotel managers and graduates are expected to build those skills and competency blocks to drive the organizational performance. Stakeholders, including educational institutions and hotel managements, need to collaborate in developing and delivering hotel managers‘ financial competencies that focus on the managers‘ objective contribution to the profitability of the Hotels.
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    Determinants of Liquidity in Ethiopian Private Commercial Banks
    (Mekelle University, 2025-11-24) Mitku wendye
    This study examines the determinants of liquidity in Ethiopian private commercial banks over the period 2011–2022. Maintaining adequate liquidity is vital for the stability and performance of the banking sector, particularly in developing economies where financial markets are shallow and access to external liquidity is limited. The study aims to identify the key bank-specific and macroeconomic factors that influence the liquidity position of private commercial banks in Ethiopia. Panel data were collected from audited annual financial statements of selected private commercial banks and macroeconomic indicators obtained from the National Bank of Ethiopia and the World Bank. The study employed descriptive statistics, correlation analysis, and panel regression models to analyze the data. After conducting model specification tests, the Random Effects model was selected as the most appropriate estimator. The empirical results revealed that capital adequacy ratio (CAR) and profitability (ROA) have a positive and statistically significant influence on bank liquidity, indicating that well-capitalized and profitable banks are better positioned to maintain adequate liquidity buffers. Conversely, non-performing loans (NPL) and loan growth (LGR) exhibited negative and significant relationships with liquidity, suggesting that poor asset quality and aggressive credit expansion tend to constrain liquidity. Among macroeconomic variables, GDP growth rate positively and significantly affected liquidity, while inflation had a negative though marginally significant impact. Other variables such as bank size and interest rate spread showed weak or insignificant effects. Oveall, the findings imply that internal bank management practices and financial strength play a more decisive role in determining liquidity than external economic conditions. The study concludes that improving capital positions, enhancing profitability, managing credit risk, and maintaining prudent lending policies are critical to sustaining liquidity in Ethiopian private banks. It further recommends that regulators strengthen supervisory frameworks and promote macroeconomic stability to support the soundness and resilience of the banking sector.
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    THE EFFECT OF CORPORATE GOVERNANCE ON THE PERFORMANCE OF MICROFINANCE INSTITUTIONS
    (Mekelle University, 2025-11-24) Kidist Tsegaye
    The research is centered on Assessing the effect of Corporate Governance on the performance of Selected MFIs. The researcher used explanatory research design based on quantitative approach in order to get better analysis of the study. In addition, correlation and regression analysis also computed through SPSS result. From the study findings prove that; Based on the statistics the financial performance of sample Microfinance, board size ranges from 5 to 10 members. This indicates that almost all sample MFIs have complied the regulation of NBE which need to have not less than 7 board members. With regards to educational background, the majority we can say 90 percent reveals that the board members have BA degree and above up to PhD. This show that, the board members have better educational background adequately understand financial reports and other company reports in order to know or better still make appropriate decisions that would help the institution grows. 83.3% characterized by the presence of competence directors that majority of the directors have business related educational background. The study shows around 63.3% board members have seven years and above experience in financial sector. This also contributes for better improvement of MFIs financial performance. So, effective implementation and strengthening the internal control system is very essential for MFIs growth and sustainability. The correlation analysis indicates that board size, educational back ground, Frequency of board meeting, and board experience in the sector are positively and significantly correlated with Return on Asset. However, Board sub-committee size is negatively correlated with return on asset. From the model summary above indicates that 88.3% of variation in the return on equity is explained by variations in corporate governance variables indictors. Four of the hypothesis is accepted and one was rejected and the null hypothesis is validated. The researcher recommended that, effective implementation and strengthening the internal control system is very essential for MFIs growth and sustainability.
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    The Impact of Tax Incentives on Foreign Direct Investment in Ethiopia
    (Mekelle University, 2025-10-24) Hilawe Seyfe
    This study critically evaluates the efficiency and impact of tax incentives on attracting and retaining Foreign Direct Investment (FDI) in Ethiopia, addressing the central policy assumption that generous fiscal concessions, such as tax holidays and customs duty exemptions, constitute the primary mechanism for securing global investment capital. Given the potential cost to public revenue, this research was designed to provide empirical evidence on the cost-effectiveness and sustainability of the current incentive system. The methodology utilized a analysis of two decades of FDI flow data to establish macro-level correlations, which was then critically complemented by a comprehensive qualitative survey of over 28 foreign investors and senior management across key manufacturing and service sectors in Ethiopia. The survey specifically focused on ranking investment criteria, contrasting the perceived value of tax breaks versus the essential stability of the operating environment, infrastructure quality, and efficient bureaucratic processes. The findings conclusively reveal that while fiscal incentives successfully reduce entry barriers and secure initial commitments, their influence is quickly eclipsed by non-fiscal factors; long-term investment decisions, capital retention, and reinvestment are overwhelmingly driven by political predictability, minimized regulatory friction, and efficient access to Ethiopia's burgeoning domestic and regional markets. Crucially, the analysis identifies a systemic inefficiency where the current generalized incentive system, being largely untargeted and sector-agnostic, results in significant public revenue leakage without a corresponding proportional increase in high-quality, export-oriented FDI. Recommendation: Consequently, the paper concludes that the current policy is suboptimal for maximizing national development goals, advocating for a fundamental shift away from generalized tax holidays towards a strategic, performance-based incentive framework linked to measurable metrics like export volume and technology transfer, which must be immediately coupled with urgent policy action to enhance core institutional factors and infrastructural capacity to improve Ethiopia’s overall investment climate.
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    Assessment of Internal audit effectiveness: The case of selected Federal Public organizations of Ethiopia.
    (Mekelle University, 2025-10-24) Henok Sewasew
    The main concern of this study is to assess and describe the challenges that internal audit department at public organization and how these challenges could be addressed. This study employed a descriptive research design. The study used purposive sampling in identification of 136 respondents as target population which encompasses from internal auditors and 10 from executives of control department residing in Addis Ababa. Data collected from questionnaires was coded and analyzed with the aid of the Statistical Package for Social Sciences (SPSS) version 20 for descriptive statistics. Presentation was by use of tables. Percentages mean mode and standard deviation which enhanced a meaningful description. The study revealed that lack of: management and staff support, shortage of organizational independence, inadequate competency of internal audit staffs and lack of updated audit procedural manuals, lack of BOD attention for internal audit department, feeling of audited as a fault finder, dispute and misunderstanding auditors face from audited, inadequacy of time to operate exhaustively , supervisors` rare in person follow up of resident auditors, insufficient auditors knowledge on contemporary banking systems, lack of qualified staff and scarcity of facilities. To address these findings, the study recommends free access for certification, compilation of updated audit manuals, conducive working environment, awareness creation program to audited, proactive than reactive audit engagement, revision of existing structure and extensive training program to get decisive value adding output out of internal auditing practices.
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    DETERMINANTS OF DONOR FUND UTILIZATION EFFECTIVENESS: A CASE STUDY ON AFRICA CDC IPF, ETHIOPIA
    (Mekelle University, 2025-10) FISSEHA MOGES
    The goal of this study was to determine what determines the Africa CDC IPF initiative in Ethiopia's efficient utilization of donor funds. We sought to understand why money isn't always spent as effectively as intended. In order to accomplish this, we used surveys and an examination of important project documents to get feedback from 115 employees who were directly involved in the project at different government agencies. This research identifies five key elements that have a significant impact: sound financial management, capable leadership and management, appropriate technology and expertise, consistent donor behavior, and efficient procurement procedures. Many of the fundamentals are in place, but some significant obstacles are preventing progress. For example, throughout five years, the project only used roughly half of its allotted budget. The procurement procedure is a significant roadblock; it is frequently sluggish and hampered by red tape. Additionally, we discovered that equipment purchased with project funds isn't always accurately documented and that more specialist training in foreign aid management is required. In summary, for a project’s success, the proper functioning of all the components working together is essential where all these parts work together. When one part, like procurement, falters, it drags everything else down. On the other hand, all the components will also be challenged when one, such as procurement, fails. To change this, the initiative must engage in team training, improve asset tracking, streamline its purchasing procedures, and cultivate a more open and honest culture with its funders. The secret to making sure the donor's contribution actually fulfills it promises to get these components just right.
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    FACTORS AFFECTING COMPLIANCE BEHAVIOR OF CATEGORY 'C' TAXPAYERS: A CASE STUDY OF HADINET SUB CITY, MEKELLE
    (Mekelle University, 2025-09-24) EPHREM BEKELE
    Tax is a compulsory financial charge imposed by governments on individuals or legal entities to finance public expenditures. Despite its crucial role in sustaining public services, many governments faced persistent challenges in collecting the appropriate amount of revenue. Understanding the factors that influenced taxpayer compliance was therefore essential for effective tax administration. Accordingly, this study employed an explanatory research design to identify the factors affecting tax compliance behavior among Category C taxpayers in Hadinet Sub-City, Mekelle. A total of 186 Category C taxpayers were selected using stratified sampling followed by random sampling from each stratum, and data was collected from 179 respondents through structured questionnaires. Descriptive statistics such as tables, means, and standard deviations were used to summarize the data, while multiple linear regression analysis was employed to identify the key factors influencing tax compliance. The findings revealed that tax knowledge and awareness, the probability of being audited, and the perceived fairness of the tax system had positive and significant effects on the compliance behavior of Category C taxpayers. In contrast, financial constraints have a significant negative impact. However, the complexity of the tax system, perceptions of corruption, and weak enforcement did not exhibit any statistically significant relationship with compliance decisions. Based on the findings, the study concluded that enhancing taxpayers‘ knowledge and awareness, promoting fairness in the tax system, and strengthening audit capacity are essential to improve compliance. It is recommended that continuous and problem-solving tax training be provided to taxpayers to foster a positive attitude toward taxation. Responsible authorities should also deliver accessible tax education and promote financial literacy among Category C taxpayers. Furthermore, building the capacity of tax auditors and employees to strengthen audit practices, along with implementing measures that ensure fairness in the tax system, is crucial. These interventions are expected to improve voluntary compliance among Category C taxpayers.