| Abstract: | This thesis investigates the assessment of liquidity risk management and its impact on the
financial performance of private commercial banks in Ethiopia, with a special focus on
Wegagen Bank, from 2016 to 2023. The study employs a quantitative research approach and
explanatory research design, utilizing secondary data from Wegagen Bank's annual financial
reports. The analysis centers on key liquidity ratios: Cash Reserve Ratio (CRR), Loan-toDeposit Ratio (LDR), Liquid Assets to Total Assets Ratio (LATAR), Liquid Assets to Current
Liabilities Ratio (LACLR), and Non-Performing Loans Ratio (NPLR), correlating them with
financial performance indicators such as Return on Assets (ROA) and Return on Equity
(ROE), along with the moderating variable of Conflict and Political Instability (CPI).The
findings reveal a significant positive correlation between liquidity management practices and
financial performance, indicating that effective liquidity risk management is crucial for
maintaining financial stability, particularly in an environment characterized by political
unrest. The study highlights that Wegagen Bank's financial performance has been adversely
affected by rising non-performing loans and the impact of political instability.Based on these
findings, the researcher recommends that Wegagen Bank enhance its liquidity management
frameworks, implement robust credit risk management practices, adopt adaptive strategies to
respond to political instability, and strengthen stakeholder communication to rebuild trust.
Furthermore, it underscores the need for additional empirical research to explore the longterm effects of liquidity strategies under varying political circumstances. |
