Alem, Hagos (PhD)Tesfaye, Mulugeta2018-11-042023-11-042018-11-042023-11-042018-02http://etd.aau.edu.et/handle/123456789/13728A thesis submitted to the department of accounting and Finance (A.A.U) in partial fulfillment for the requirement of The degree of Master of Science in accounting & financeThis study attempts to reveal the relationship between credit risk and financial performance of commercial banks in Ethiopia. In order to investigate these study quantitative research approach is employed based on documentary analysis. A panel data from six selected commercial banks covering the ten-year period (2007-2016) is analyzed within the fixed effects model on regression analysis and using E-view8 software. The study used one dependent variable return on asset (ROA), four independent variables that are: nonperforming loan to total loan and advance ratio (NPLTLA), loan provision to total loan and advance ratio (LPTLA), total loan and advance to total deposit ratio (TLATD) and the ratio of non-performing loan to loan provision (NPLLP) as measures of credit risk. Both descriptive statistics and regression analysis specifically fixed effects model were used to analyze the relationships of the depended variable with explanatory variables. The regression result show that non-performing loan to total loan and advance ratio, loan provision to total loan and advance ratio and the ratio of non-performing loan to loan provision show negative and significant effect at 1% and 5% significance level on financial performance of commercial banks in Ethiopia. However, total loan and advance to total deposit ratio show positive and significant effect at 1% significance level on financial performance of commercial banks in Ethiopia. The research concluded that credit risk has significant effect on financial performance of commercial banks in Ethiopia. Hence, the study recommend in support of each variable for commercial banks of Ethiopia should enhance their capacity in credit analysis and loan administration.en-USBankCredit riskPerformanceThesis