Kishor Meher

The study aims to investigate the impact of determinants of financial distress on financial sustainability of Ethiopian commercial banks. The balanced panel data of 12 commercial banks of Ethiopia have been taken for the study from 2011 to 2017. The research deploys Ordinary Least Square (OLS) Regression Model. The indicators of financial distress are bank’s specific internals and macro-economic factors. The proxies of financial sustainability are Return on Assets, Return on Equity, Financial Stability Index and Bank Soundness. The findings reveal that the Absolute Liquidity Risk and Net Income Growth are found to be positive and significant and Solvency Risk negative and significant in relation to Return on Assets. Asset Quality is found to be positive and significant and Solvency Risk negative and significant with respect to Return on Equity. The Asset Quality and Net Income Risk are positive and significant and Solvency Risk is negative and significant with relation to the Financial Stability Index. Absolute Liquidity Risk and Liquidity Risk are positive and significant and Credit Risk negative and significant with Bank Soundness. Free Cash Flow and Net Income Growth are essential for enhancing Return on Assets and Bank Soundness, and managing equity within the prudential norms could bring forth short-term financial sustainability of commercial banks. By lowering provisioning of loan loss, Growth in Net Interest Income and managing Solvency Risk could ensure financial stability to the banks, which in turn leads to financial sustainability. The study reveals that financial sustainability of banks is insulated from the exposures of systematic risks originating from macroeconomic factors.

The non-life insurance companies indemnify the properties from the risk of being damaged due to unforeseen events like natural calamity or accidents. The probability of bankruptcy is imminent on account of large, unprecedented claims. As a risk saver of various society stakeholders, these insurers must be efficient while managing the insurance business. The present research thrusts upon to evaluate the efficiency and decomposition that would further direct the insurers towards achieving optimal scale. Thus, the captioned research aims to measure and rank the technical efficiency of the general insurance firms of Ethiopia and evaluate and analyze their relative efficiencies. The research adopts a quantitative approach and deploys descriptive analysis by a panel data of 17 Ethiopian general insurers for the period 2005-2016 on the input-output-oriented approach of Data Envelopment Analysis (DEA). The data of general insurance are obtained using stratified sampling from the mix of life and general category. The inputs employed are total expenses, total liabilities, and shareholder’s fund, while net premiums earned and income from investments are used as outputs. The findings reveal that the public insurer is technically efficient by operating at an optimal scale as compared to all private insurers who, in turn, experience pure technical inefficiency to scale inefficiency due to poor management practices and erroneous utilization of input materials. Increasing Returns to Scale (IRS) witnessed a major form of scale inefficiency in 2016. Private insurers should increase capital and size of assets, cost efficiency, and improve key management skills.

Acknowledgment
The authors express their thanks of gratitude for the support extended by Ethiopia’s insurance companies’ officials to provide the hard copies of published annual reports up to 2016 as the secondary data are not available after that year’s analysis.