Determinants of Financial Distress in Ethiopia’s Private Banking Sector

Abstract

The goal of this study was to determine the elements that contribute to financial distress in Ethiopia's private banking industry. Between 2019/2020 and 2023/2024, the study predominantly employed a quantitative research approach, drawing on sample data from 13 private banks. To achieve the study's objectives, the researcher relied on secondary data sources. Multiple regression analysis was performed to estimate the influence of various factors on financial distress. The findings show that Altman’s z-score is positively and strongly influenced by profitability and liquidity. In contrast, inflation, firm size, and solvability all have a negative and significant influence on Altman’s z-score. As a result, it was determined that the macro and micro components that were taken from the variables had a strong correlation and were even more capable of identifying the financial distress of the private banking sector in Ethiopia.