The Effect of External Economic Factors on Return on Average Equity on the Selected Rwandan Commercial Banks Using Panel Data Regression Model
The general objective of this paper was to examine the effect of external economic factors on Return on average Equity R in the selected Rwandan commercial banks. We used secondary data as practical means of obtaining information related to the research topic. The data were obtained from 12 commercial banks in Rwanda. In collecting secondary data, annual reports were used. Financial reports of 2001–2017 of each commercial bank were used with the total observations number N of 12 17= 204.Panel data regression model, Y=Xß µ was applied in this study, where LM test plmtest , Restricted F test pFtest and Hausman test phtest were used. R programming language was also used as statistical tool. The findings indicated that there is a significant positive effect of inflation rate on return on average equity, there is no significant effect of GDP Growth rate on return on average equity, there is no significant effect of currency depreciation on return on average equity , there is a significant negative effect of private sector credit growth on return on average equity in Rwandan selected commercial banks. From the value of R Squared equals to 0.22883 = 22.883 , this study concluded that, inflation rate and private sector credit growth can only affect the return on average equity in commercial bank on the rate of 22.883 and the significant model is R = 25.80424 0.563706I 0.15664P. This implies that there may be other factors, like internal factors that should affect the return on average equity in commercial banks.
Economic Factors, Equity and Commercial Banks
Habimana Theogene | Habinshuti Patrice | Mudaheranwa Benjamin | Mutambuka Deo