Abstract:
Liquidity is increasingly important in the face of high funding costs. The main objective of this
study is to identify the main determinants of selected private commercial banks liquidity. In order
to achieve the objective explanatory research design and quantitative research approach was
used. Data has been collected from a secondary source of ten selected private commercial banks
in the sample covering the period from 2010 to 2019. Bank specific and macroeconomic variables
were analyzed by using the balanced panel fixed effect regression model. Bank’s liquidity is
measured by liquid asset to total asset ratio. The findings of the study revealed that, bank size and
loan growth has negative and statistically significant effect on liquidity; while non-performing
loans, profitability and inflation have positive and statistically significant effect on liquidity of
Ethiopian private commercial banks. However, capital adequacy, real GDP growth rate and short
term interest rate have no statistically significant effect on the liquidly of Ethiopian private
commercial banks. Private commercial banks to maintain their financial proficiency shall have
bank liquidity management policy by assimilating both bank specific and macro-economic
variables.
