THE FINANCIAL PERFORMANCE OF COOPERATIVE CONSUMERS IN ADDIS ABEBA

Abstract

This study was conducted to examine the factors affecting of firms’ financial performance of the consumer cooperatives in Addis Ababa. The study used secondary source of data, which is panel data in nature, over the period 2016-2020. The data of audited financial statement were collected from consumer cooperatives and macroeconomic data collected from Addis Ababa plan commission and National Bank of Ethiopia. Furthermore, the assumption of classical liner regression model (CLRM) needed to be fulfilled for generalized list square (GLS) or ordinary least square (OLS) were tested using model selection criterion of Hausman specification test random effect model was appropriate to examine the factor affecting of financial performance. Results using random effect panel regression model exhibited that, operational expense ratio, natural log of firm size, social contribution and Inflation were negative and statistically significant effect on financial performance. On other hand, variables like capital structure, sales growth and liquidity ratio have positive and statistically significant effect on consumer cooperatives financial performance. Based on the findings, the researcher recommended that the management bodies of the consumer cooperative should ensure appropriate debit ratio and give greater attention to continuous increasing operating expense ratio because of an increasing operating expense. Besides, Addis Ababa City Government Administration of Cooperative Agency should adhere tight regulation toward the consumer cooperative sectors. Thus, the overall finding indicates that both consumer cooperative factors and macroeconomic factors have statistically significant effect on financial performance.