Evaluating Financial Distress Condition of Private Commercial Banks in Ethiopia
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Date
2021-11
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A.A.U
Abstract
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.
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Keywords
Financial distress, Bankruptcy,Financial soundness, Commercial banks