Credit Risk Management and its Impact on Performance on Ethiopian Commercial Banks
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Date
2011-06
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Addis Ababa University
Abstract
Credit risk management has become an important topic for financial institutes, especially
since the business sector of financial services is related to conditions of uncertainty. The
turmoil of the financial industry emphasizes the importance of effective risk management
procedures. Consequently, this thesis studies “Credit Risk management and its impact on
performance in Ethiopian Commercial Banks.” This research objective was formulated in
order to gain a better understanding of credit risk management and its impact on
performance (return on asset).
Credit risk has always been a vicinity of concern not only to bankers but to all in the
business world because the risks of a trading partner not fulfilling his obligations in full
on due date can seriously jeopardize the affaires of the other partner.
The axle of this study is to have a clearer picture of how banks manage their credit risk.
In this light, the study in its first section gives a background to the study and the second
part is a detailed literature review on banking and credit risk management tools and
assessment models.
Quantitative research design is employed under the quantitative research design survey
method is used. The data were collected by cross sectional survey method. The forth part
of this study is analysis of primary data by descriptive statistical tools and on hypothesis
testing using regression model. This leads the researcher to conclude in the last section
that banks with good credit risk management policies have a lower loan default rate and
relatively higher return on asset
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Keywords
Performance on ethiopian commercial banks