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Determinants of Credit Risk in Ethiopian Private Commercial Banks

The document analyzes the link between bank specific factors and credit risk indicators using panel data from Ethiopian private commercial banks from 2006-2012. It finds that credit growth and return on equity negatively impact credit risk, while inefficiency and deposit rates positively but insignificantly impact credit risk.

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Atakelt Hailu
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26 views1 page

Determinants of Credit Risk in Ethiopian Private Commercial Banks

The document analyzes the link between bank specific factors and credit risk indicators using panel data from Ethiopian private commercial banks from 2006-2012. It finds that credit growth and return on equity negatively impact credit risk, while inefficiency and deposit rates positively but insignificantly impact credit risk.

Uploaded by

Atakelt Hailu
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

International Journal of Accounting and

Financial Management Research (IJAFMR)


ISSN(P): 2249-6882; ISSN(E): 2249-7994
Vol. 5, Issue 3, Jun 2015, 1-14
TJPRC Pvt. Ltd.

DETERMINANTS OF CREDIT RISK IN ETHIOPIAN PRIVATE


COMMERCIAL BANKS
ATAKELT HAILU ASFAW & P. VENI
1

Research Scholar, Department of Commerce and Management Studies, Andhra University, Visakhapatnam,
Andhra Pradesh, India
2

Professor, Department of Commerce and Management Studies, Andhra University, Visakhapatnam,


Andhra Pradesh, India

ABSTRACT
Optimal portfolio diversifications, establishing a comprehensive credit limit and loan pricing system as well as
Credit risk management strategy, policy and procedures without a clear picture of Credit risk drivers is just considered as
putting money on fire. Therefore, analyzing the link between the bank specific factors and credit risk indictor is
indispensably required using a panel data set over the period of 2006-2012. The three Panel data estimation method, pooled
OLS regression, fixed effect and random effect model, were used for extracting good result and F-test ascertained the
appropriateness of Pooled OLS regression model. Its result revealed that the credit growth and return on equity had
statistically significant negative impact on Credit risk indicator of the large Ethiopian private commercial banks. However,
inefficiency, and deposit rate had statistically insignificant positive influence on the Credit risk indicator. It means that
inefficient bank as well as those Banks that charge high deposit rate is likely to incur higher problem loan.

KEYWORDS: Loan Pricing System, OLS Regression, Credit Risk, F-Test

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