• Abdirahman Ahmed Isse
• Dr. Navkiranjit Kaur Dhaliwal.

Commercial banks are profit seeking organizations operating as intermediaries between borrowers and lenders and play predominant role in credit growth and granting credit facilities. Commercial Banking sector is related to conditions and uncertainty; they are exposed to several types of risks. Among these risks, credit risk makes a severe threat to the financial performance of the banks. This study carried out an investigation in to the impact of credit risk management on financial performance of commercial banks in Ethiopia from 2001 to 2017. The secondary data collected from the bank’s annual reports was analyzed by using panel regression analysis (random effect model). In the model Return on Asset (ROA) was used as the financial performance indicator while capital adequacy ratio (CAR), loan loss provision ratio (LLPR), and loan and advance to total deposit ratio (LDR) as credit risk indicators while macroeconomic variables were real gross domestic product growth rate (GDP) and inflation rate (INFL). The result of the analysis indicates that CAR, GDP and INFL have positive and statistically significant effect on return on asset (ROA). LLPR found negative statistically significant effect on ROA, while LDR found negative but statistically insignificant effect on ROA. The study concluded that credit risk still remains a major concern for the commercial banks in Ethiopia because credit risk is an important predictor of bank financial performance. The findings help the policy makers in setting better performance strategies and enable managers of the banks to allocate asset more efficiently

Commercial banks, credit risk indicators, gross domestic product, inflation, financial performance, panel data regression model.

"The impact of credit risk management on financial performance of commercial banks in Ethiopia", International Journal of Emerging Technologies and Innovative Research (www.jetir.org), ISSN:2349-5162, Vol.5, Issue 11, page no.247-264, November-2018, Available :http://www.jetir.org/papers/JETIR1811A33.pdf

"The impact of credit risk management on financial performance of commercial banks in Ethiopia", International Journal of Emerging Technologies and Innovative Research (www.jetir.org | UGC and issn Approved), ISSN:2349-5162, Vol.5, Issue 11, page no. pp247-264, November-2018, Available at : http://www.jetir.org/papers/JETIR1811A33.pdf