Abate, Sewale (PhD)Abebe. Robel2021-07-222023-11-042021-07-222023-11-042021-03http://etd.aau.edu.et/handle/123456789/27316This study aimed to identify effects of financial risk on the performance of Ethiopian Commercial banks over the period from 2000 to 2018. The study employed secondary data that bank detailed data were obtained from the audited financial statements of the selected Ethiopian commercial banks head office. In addition, Macroeconomic data were used from MOF. Moreover, balanced panel data were utilized in the research. Accordingly, by using purposive sampling technique only seven commercial banks out of the total of seventeen commercial banks functioning in Ethiopia were included here. Beside to this, the study used ROA as a dependent variable and liquidity risk, solvency risk, credit risk, interest rate risk, foreign exchange rate risk, GDP and bank size as independent variables. Finally, the empirical result of random effects panel data model regression revealed that liquidity risk, solvency risk, GDP and Bank size take positive effect on ROA and statistically insignificant with the exception of liquidity risk which takes positive impact on ROA as well as statistically significant impact, while credit risk has statistically significant and negative influence on the financial performance (ROA) of the Ethiopian commercial banks providing interest rate risk and foreign exchange rate risk statistically insignificant and negative influence on ROA. As a result, Ethiopian commercial banks should evaluate the borrowers’ historical and projected cash flows and adequate collateral margins in order to improve financial performance, need to come with credit policies and devise strategies that not only limit the banks' exposition to credit risk but also establish a proper credit risk management strategy, should have optimal level of liquidity which enables to meet their contractual commitments and should device rigorous policies and measures with appropriate fiscal and monetary policies must be applied to control risks in an economy.enFinancial risk, performance, commercial banksThesis