African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4131

Full Length Research Paper

The impact of credit risk on profitability performance of commercial banks in Ethiopia

Million Gizaw
  • Million Gizaw
  • Department of Accounting and Finance, Jimma University, Ethiopia.
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Matewos Kebede
  • Matewos Kebede
  • Department of Accounting and Finance, Jimma University, Ethiopia.
  • Google Scholar
Sujata Selvaraj
  • Sujata Selvaraj
  • Department of Banking and Finance, Jimma University, Ethiopia.
  • Google Scholar


  •  Received: 06 August 2013
  •  Accepted: 23 January 2015
  •  Published: 28 January 2015

Abstract

The objective of the study was to empirically examine the impact of credit risk on profitability of commercial banks in Ethiopia. For the purpose secondary data collected from 8 sample commercial banks for a 12 year period (2003-2004) were collected from annual reports of respective banks and National Bank of Ethiopia. The data were analyzed using a descriptive statics and panel data regression model and the result showed that credit risk measures: non-performing loan, loan loss provisions and capital adequacy have a significant impact on the profitability of commercial banks in Ethiopia. The study suggested a need for enhancing credit risk management to maintain the prevailing profitability of commercial banks in Ethiopia.

 

Key words: Commercial banks, credit risk, Ethiopia, panel data regression performance, profitability.