Abstract:
This study aims to examine the effect of banking regulations on the financial performance of
16 private commercial banks in Ethiopia. To achieve this objective, the study employed panel
data analysis of sixteen private commercial banks spanning five years’ period. In this study
explanatory research design was applied using random effect robust OLS regression. The
findings of the study highlight the substantial influence of regulatory frameworks on bank
operations and profitability. By elucidating the intricate dynamics between regulations and
financial outcomes, this study contributes to a deeper understanding of regulatory effects in
the banking sector. The descriptive results of the study offer insights into the general trends
and characteristics of data collected from Ethiopian private banks, providing a
comprehensive overview of key variables. The variables Capital Adequacy Ratio (CAD), and
Asset quality (AQ), legal reserve (LGR) and income diversification are important metrics for
assessing bank performance (ROA). Based on the study results, recommendations are made
for Ethiopian private commercial banks and policymakers to focus on maintaining capital
reserves, managing asset quality, and implementing income diversification and mantling
optimum reserve requirement to improve overall performance and regulatory compliance.
