Evaluating Financial Distress Condition of Private Commercial Banks in Ethiopia

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A robust banking system is obviously one of the pillars of a financial system of any economy specially a country like Ethiopia its financial sector mainly dominated by commercial banks. The banking system in Ethiopia showing progress in performance and almost all banks are reporting positive profit and ensures a sustainable economic development and welfare by forming adequate capital and allocating funds efficiently for investment projects, payment services, strong financial systems. This study strives to assess the financial distress condition of private commercial Banks in Ethiopia for the period 2012-2019. The analytical tool used in the study is the Altman’s bankruptcy prediction model of 1993. The result showed that the studied private commercial banks on average categorized under ‘Gray Zone’. Specifically, Abyssinia, Dashen, Hebret, Awash, Wogagen, Addis, Zemen and Anbesa bank were categorized under ‘Gray Zone’ while the remaining seven banks namely: Abay, Berhan, Buna, Nib, Oromia International and Cooperative bank of Oromia banks were categorized under ‘Distress Zone’. Therefore, banks categorized under distress zone needs to take corrective actions in order to avoid bankruptcy.



Financial distress, Bankruptcy,Financial soundness, Commercial banks