Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 124

Article in Press

Credit Risk Management and Profitability: Empirical Evidence on Ethiopian Commercial Banks

Shibiru Tade Kidane

  •  Received: 14 September 2018
  •  Accepted: 30 October 2018
Effective credit risk management is very significant to the health of commercial banks. It has an opportunity of either running or ensuring the nourishment and growth of the bank. The study assessed the impact of credit risk management on the profitability commercial banks in Ethiopia. Secondary data was gathered from National Bank of Ethiopia (NBE) for ten year periods (2008-2017). The study adopted Correlation analysis and fixed effect Model. ROA was used to measure profitability of commercial banks, bank specific factors(Capital adequacy, Loan and Advances to total deposit, Non- Performing Loans, Bank size and Liquidity) and Macroeconomic factors( Inflation and Gross Domestic Product) as indicators of credit risk management. The findings showed that CRM in terms of bank specific and macroeconomic factors have significant impact on profitability of commercial banks in Ethiopia. Also the result displayed that profitability of commercial banks is not affected by the amount of non- performing loans during the study. The study recommended that banks’ credit risk management should not give due devotion only to the internal factors but also to external factors exclusively (GDP and Inflation) in order to minimize their negative impact on profitability of commercial banks in Ethiopia

Keywords: Credit Risk Management, Profitability, Bank Specific and Macroeconomic factors, Commercial Banks in Ethiopia.