The Effect of Asset Diversification on Profitability of Commercial Banks in Ethiopia

This study's goal is to determine how asset diversification has affected the financial performance of commercial banks in Ethiopia. Eight chosen commercial banks were taken into account, and there were 80 observations made between 2011 and 2020. The financial statements' secondary data was gathered, and a random effect panel regression model was used to examine it. The regression model significantly predicts the outcome variable with a p-value of (0.000). The empirical findings of this study suggest that loans and advances had positive statistically significant effect on profitability. Financial asset and cash and cash equivalent had negative statistically significant effect on the profitability of banks. On the other hand fixed asset don‘t have statistically significant effect on profitability. It is recommendable for the banks to diversify their assets to loan and advances for better profitability.