Abstract:
The objective of the study is empirically examine the impact of credit risk on the profitability of
private commercial banks in Ethiopia. Considering variables related to lending activities to
determine bank-specific, industry-specific, and macroeconomic factors that affect banks financial
performance over the period of 14 years (2010-2024). The empirical investigation used the
accounting measure of Return on Equity, which is the explain variable, to represent banks’
performance, while the nonperforming loan ratio, capital adequacy ratio, cost per loan asset ratio,
bank size, loan and advance to deposit ratio, inflation, and gross domestic product are taken as
explanatory variables. Secondary data used for six banks that stayed in the industry for more than
fourteen years among twenty-five private banks that are functional at the moment in the Ethiopian
banking industry. Data used for this study were obtained from National Bank of Ethiopia and the
bank’s annual report. To achieve the intended objective of this study Explanatory and descriptive
research design used as the research method. Both Qualitative & Quantitative approach were
used to collect the qualitative data from the audit report of the bank. To this end, correlation and
multiple regression analysis with the fixed effect model, and EViews 10 software was used to
regress the data.
