Ethiopian Journal of Business and Economics (The) <p><em>The Ethiopian Journal of Business and Economics</em> (EJBE) is a biannual peer-reviewed publication of the College of Business and Economics, Addis Ababa University. It seeks to encourage thinking among academics, practitioners and policy makers in the fields of Accounting and Finance, Economics, Business Management, and Public Administration and Development Management. Equally important, its main mission is to stimulate research-based and inter- and multi-disciplinary debate on the issues involving the four fields particularly as these pertain to the Ethiopian setting and development challenges. EJBE publishes research reports, book reviews, and Master’s thesis and PhD dissertation (abridged versions or chapters). Academic articles and other publishable works from related disciplines are also welcome. EJBE is an authoritative and refereed journal.</p> <p>This journal content is now open access and licensed under Creative Commons&nbsp;Attribution-NonCommercial-NoDerivs CC BY-NC-ND.</p> en-US This content is licensed under Attribution-NonCommercial-NoDerivs CC BY-NC-ND. (Aklilu Dessalegn) (Editor-in-Chief: Alemu Mekonnen (PhD)) Mon, 25 Mar 2019 12:28:09 +0000 OJS 60 Cost Efficiency of Ethiopian Banks The study has explored the efficiency level of banks using cost models. It has used the Data Envelopment Analysis score to examine the efficiency level of banks under both constant and return of scale. In addition, it has explored the scale efficiency of all the models with a statistical test on the significance of variation among Ethiopian Banks. The study finds that banks efficiency level has witnessed a wide variation across various bank groupings. The study has also found outs that the state banks efficiency<br />has been consistently on the efficiency frontier reflecting the high dominance of the banks in the Ethiopian banking system. In addition, the study finds that the small private banks efficiency is growing overtime while the middle size private banks arefacing difficulty to improve their level of efficiency. The parametric and nonparametric tests also witness that state and private banks possess different management and technology capabilities. This shows that despite the scale advantage the state banks have, the difference in their management and technology capabilities has contributed for better efficiency performances. On the other front, the statisticaltest on efficiency determinants shows that deposit growth rate, loan size and earning asset growth are positively and significantly related to efficiencies. Nevertheless, branch size and fixed asset growth rate are negatively and insignificantly related to efficiencies. Consistent to such finding, the benchmarking practice suggests that banks holding excessive deposits limiting their intermediation activities are disadvantaged to count on their efficiency performances. Some of the results from this section of the study such as top efficiency score of state banks and efficiency determinants are unexpected and are explained further in the qualitative study as to their reasons. Tesfaye Lelissa, Abdurezak Mohammed Copyright (c) Infrastructural Investment and Industrial growth: A Private Investment Led Approach Industrial development has been upheld as a catalyst for quick recovery of lost fortune in a relegated economy. Spurring industrial development is a function of wide range of actions and activities that must be coordinated within the socio-political and economic enclaves towards the achievement of effective industrialization of the system. Part of the activities required spurring industrialization and economic recovery include conscious investment in infrastructural development. This study examines the impact of infrastructural investment on industrial growth in Nigeria, using the annual time series data sourced from the Central Bank of Nigeria’s (CBN)<br />statistical bulletin between 1960 and 2015. The study adopts Autoregressive Distributed Lag (ARDL) bound testing approach developed by Pesaran, Shin and Smith (2001) in estimating the relevant relationships. The result of the long run estimates indicates that the variables are mutually co-integarted, suggesting that a long run relationship exists. The result of the short run dynamics shows that changes in the previous one lag period of infrastructural growth, industrial growth, labor growth, will trigger a 1% increase in the current industrial output growth. The lag of the error<br />Correction Term which indicates the speed of adjustment of these variables to equilibrium was found to be statistically significant at 1% with the coefficient value (-0.3902). This implies that 39% of the distortion in the short run is correct on yearly basis. We therefore submit that infrastructural investment in the industrial sector is a necessary but not sufficient condition for economic recovery if structural transformation does not consider the interlink among other important sectors of the economy that would facilitate growth recovery and speed up the rate of industrialization in Nigeria. Shobande Olatunji, Etukomeni Charles Copyright (c) Short-run Behavior of Defensive Assets in the Ethiopian Commercial Banking Sector The paper aims to identify and measure the impact of factors responsible in shaping the behavior of defensive assets in the Ethiopian banking sector. The focus of the analysis is on the Ethiopian banking sector rather than an individual bank. An attempt is made to capture how the Ethiopian banking sector adjusts its defensive asset position to changes in money supply, relative yields on asset holdings, discount rate, the demand for different bank assets, availability of funds, and legal reserve requirements. Except for required reserves, discount rate and relative yields on asset holdings, the rest of the explanatory variables are statistically significant in explaining the short-run behavior of defensive assets. The paper concludes initial stock of excess reserves, treasury bills, loans and their lag, narrow money supply, saving deposit of the public held with different financial institutions, and bank capital are what explain short-run behavior of defensive assets in the Ethiopian banking sector. Finally, the difference in the behavior of excess &amp; free reserves found to be negligible which is a signal of insignificant use of short-term borrowings in the Ethiopian commercial banking system. Yitbarek Takele Copyright (c) Remittances and the Growth of the Nigerian Economy The study investigated the contributions of foreign remittances on economic growth in Nigeria from 1980 to 2016, using the Vector error correction modelling (VECM) technique to analyze the long run and short run impact of disaggregated remittances that is Migrants ’Remittances and Workers’ Remittances to find out whether they will perform differently in relation to economic growth in Nigeria. The two components of remittances performed differently. While the Migrants remittance component exhibits a long run positive, statistically significant relationship with economic growth, the other<br />component i.e Workers Remittance has a negative statistically significant impact in the long run, short run relationship was also established among the variables as the ECM term was negative and statistically significant. The results showed a unidirectional causality from GDP per capita to Migrants remittances while no causality was found between workers’ remittances and gross domestic product per capita. The study therefore recommends the need to strategically harness the contribution of workers’ remittances by ensuring that the money is spent on locally produced goods instead of<br />imported goods so as to ensure a positive relationship with economic growth in Nigeria. The study hereby concludes that remittance is a major driver of economic growth in Nigeria. Margaret Abiola Loto, Ajibola Akinyemi Alao Copyright (c) Entrepreneurship Drivers in the Non-farming Sector: Rural-Urban Contrast Using data from 5262 households, we explored entrepreneurial drivers in the non-farm sector. Marital status, religion, ethnicity, education type and the size of the household plays different roles for rural and urban households’ engagement in non-farm enterprises. In both urban and rural areas, household size is a driver to non-farm enterprise engagement. Shocks in the household such as illness drive rural households to engage in the non-farm enterprise sector. However, drought restrains the participation of rural households in nonfarm businesses. Divorced households engage more in enterprises. Unmarried households, however, witnessed less involvement in the sector and it is significant for rural households. Urban illiteracy and rural primary education significantly determine households’ involvement in the non-formal sectors. Moreover, the study identified a non-linear relationship between age and enterprise engagement where engagement in non-farm enterprises increases with age up to 58 years and then declines and it is significant for urban households. In the case of urban households, male-headed households are driven to non-farm engagement. Understanding variations in marital status, socio-economic make-ups, entrepreneurial training, and education can be plausible areas of intervention to adequately understand both the entrepreneurial ecosystem and strengthen the non-farming entrepreneurial sector livelihood. Abebe Ejigu, Dereje Teklemariam Copyright (c)