The document analyzes the moderating role of bank performance indicators on the relationship between lending (advances) and credit risk (non-performing assets or NPA) for Indian public sector banks from 2000-2001 to 2011-2012. It finds that bank performance variables like borrowing, investments, reserves, deposits, capital, and total assets moderate the relationship between advances and NPA. Specifically, the study shows that over 90% of the variability in gross NPA for State Bank of India and its associates can be explained when including these bank performance variables and their interaction with advances in the regression model.
This document summarizes a research paper that analyzed the determinants of credit risk in the Indonesian banking industry. Specifically, it examined how bank-specific variables like bank size, profitability, capital adequacy, and ownership structure influence the level of non-performing loans (NPL), which is used as a measure of credit risk. The document reviews several previous studies that also analyzed the relationship between credit risk and bank-specific factors in other countries. It then outlines the methodology that will be used in the research, including the data collection and analysis methods.
Modelling the sensitivity of zimbabwean commercial banks’ non performing loan...kudzai sauka
This paper used complementary panel data models that are fixed effect regression model and panel vector auto regression model. The study was motivated by the hypothesis that both macroeconomic and microeconomic variables have an effect on the loan quality. The first part of the research was to determine the specific macro and microeconomic variables that give rise to the non-performing loans (NPLs) using fixed effect regression model. The empirical findings of this study provide evidence that nonperforming loans depends on macro and micro economic variables, the trend analysis of Zimbabwean commercial banks’ shows an upward movement of over the period of study. The study found out that Gross domestic product (GDP), Inflation, loan deposit ratio and bank size had a statistical significant effect on the level of non-performing loans (NPLs). The second part was mainly to model the dynamic relationship of all the variables that were found to affect non-performing loans (NPLs); this was done through impulse response analysis based on PANEL VAR model. One standard shock to credit growth will be greatly felt in the sixth year, whereas of size of the bank will have a great negative impulse in the seventh year.
Non Performing Loan: Impact of Internal and External Factor (Evidence in Indo...inventionjournals
ABSTRACT : Most banks in Indonesia as emerging market still rely on credit as the main income to finance their operations. But not all loans disbursed by banks are free of risk, some of them have a considerable risk and can threaten the health of the bank.NPL levels at Commercial Bank Indonesia over the past five years 1/1/2009-12/31/2013) shows a stable condition. But inversely proportional happen to the 26 Regional Development Banks (BPD), which NPL,since 2011 has continuously increased. It was reaching 3:49 % in June 2014 and was predicted to continue to rise. This study aims to study the influence of internal and external banks factors on the level of non-performing loans (NPL) in the Regional Development Bank (BPD) in Indonesia. This study is a quantitative research using panel data regression analysis with the study period from 2009 to 2013. The object of this study was 26 banks. Factors examined its effect on the NPL is a measure of a bank (SIZE), the capital adequacy ratio (CAR), the level of bank efficiency (ROA), the growth of gross domestic product (GDP), and the rate of inflation. Estimation model used is panel data models Random Effects Model (REM). The results of this study concluded that the level of efficiency of the bank (ROA) has a positive significant effect on NPL. The result of this study clearly warrant future studies.
A study on the mediating effect of gdp on relationship between gross advances...Alexander Decker
1. The study investigates the role of GDP as a mediating variable between gross advances (loans issued) and non-performing assets (NPAs, or bad loans) of major Indian banks from 2000-2001 to 2011-2012.
2. It finds that GDP significantly interacts with the relationship between advances and NPAs, with this interaction effect differing before and after the 2007-2008 financial crisis.
3. The study aims to determine if GDP mediates the relationship differently for major bank groups in India, and whether this mediation was impacted by the financial crisis.
This document summarizes a study that uses a matched sample of individual loans, borrowers, and banks to investigate the effect of banks' financial health on the cost of loans for borrowers, while controlling for borrower risk and information costs. The key findings are:
1) Borrowers pay higher interest rates on loans from low-capital banks compared to well-capitalized banks, even after controlling for borrower risk.
2) This effect is most significant for borrowers where information costs are likely important.
3) When borrowing from weak banks, these high-information-cost borrowers tend to hold more cash, indicating costs to switching lenders.
4) The results provide support for
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
This document discusses factors that influence the level of credit risk in Ethiopian commercial banks. It presents a conceptual framework that categorizes credit risk factors into three groups: quantity of credit risk, quality of credit risk management, and direction of credit risk.
The study uses a quantitative approach with descriptive and econometric techniques on data from 8 major Ethiopian banks from 1990-2012. Regression models are used to analyze the influence of factors in each group as well as a combined model.
The results show that quantity of risk and quality of risk management variables have more influence on credit risk levels, while direction variables have limited impact. Specifically, higher loan amounts, loan growth rates, and single borrower limits increased credit risk, while
Credit Risk and Financial Performance of Commercial Banks in Kenyarobert siriba
This document discusses a study on the relationship between credit risk and financial performance of commercial banks in Kenya from 2014-2018. It provides background on credit risk and how it can be measured using non-performing loans, loan loss provisions, and loans and advances. The study found that non-performing loans and loan loss provision had non-significant negative effects on bank profitability, while loans and advances had a significant positive impact. The document reviews relevant literature and theories around credit risk and financial performance.
This document summarizes a research paper that analyzed the determinants of credit risk in the Indonesian banking industry. Specifically, it examined how bank-specific variables like bank size, profitability, capital adequacy, and ownership structure influence the level of non-performing loans (NPL), which is used as a measure of credit risk. The document reviews several previous studies that also analyzed the relationship between credit risk and bank-specific factors in other countries. It then outlines the methodology that will be used in the research, including the data collection and analysis methods.
Modelling the sensitivity of zimbabwean commercial banks’ non performing loan...kudzai sauka
This paper used complementary panel data models that are fixed effect regression model and panel vector auto regression model. The study was motivated by the hypothesis that both macroeconomic and microeconomic variables have an effect on the loan quality. The first part of the research was to determine the specific macro and microeconomic variables that give rise to the non-performing loans (NPLs) using fixed effect regression model. The empirical findings of this study provide evidence that nonperforming loans depends on macro and micro economic variables, the trend analysis of Zimbabwean commercial banks’ shows an upward movement of over the period of study. The study found out that Gross domestic product (GDP), Inflation, loan deposit ratio and bank size had a statistical significant effect on the level of non-performing loans (NPLs). The second part was mainly to model the dynamic relationship of all the variables that were found to affect non-performing loans (NPLs); this was done through impulse response analysis based on PANEL VAR model. One standard shock to credit growth will be greatly felt in the sixth year, whereas of size of the bank will have a great negative impulse in the seventh year.
Non Performing Loan: Impact of Internal and External Factor (Evidence in Indo...inventionjournals
ABSTRACT : Most banks in Indonesia as emerging market still rely on credit as the main income to finance their operations. But not all loans disbursed by banks are free of risk, some of them have a considerable risk and can threaten the health of the bank.NPL levels at Commercial Bank Indonesia over the past five years 1/1/2009-12/31/2013) shows a stable condition. But inversely proportional happen to the 26 Regional Development Banks (BPD), which NPL,since 2011 has continuously increased. It was reaching 3:49 % in June 2014 and was predicted to continue to rise. This study aims to study the influence of internal and external banks factors on the level of non-performing loans (NPL) in the Regional Development Bank (BPD) in Indonesia. This study is a quantitative research using panel data regression analysis with the study period from 2009 to 2013. The object of this study was 26 banks. Factors examined its effect on the NPL is a measure of a bank (SIZE), the capital adequacy ratio (CAR), the level of bank efficiency (ROA), the growth of gross domestic product (GDP), and the rate of inflation. Estimation model used is panel data models Random Effects Model (REM). The results of this study concluded that the level of efficiency of the bank (ROA) has a positive significant effect on NPL. The result of this study clearly warrant future studies.
A study on the mediating effect of gdp on relationship between gross advances...Alexander Decker
1. The study investigates the role of GDP as a mediating variable between gross advances (loans issued) and non-performing assets (NPAs, or bad loans) of major Indian banks from 2000-2001 to 2011-2012.
2. It finds that GDP significantly interacts with the relationship between advances and NPAs, with this interaction effect differing before and after the 2007-2008 financial crisis.
3. The study aims to determine if GDP mediates the relationship differently for major bank groups in India, and whether this mediation was impacted by the financial crisis.
This document summarizes a study that uses a matched sample of individual loans, borrowers, and banks to investigate the effect of banks' financial health on the cost of loans for borrowers, while controlling for borrower risk and information costs. The key findings are:
1) Borrowers pay higher interest rates on loans from low-capital banks compared to well-capitalized banks, even after controlling for borrower risk.
2) This effect is most significant for borrowers where information costs are likely important.
3) When borrowing from weak banks, these high-information-cost borrowers tend to hold more cash, indicating costs to switching lenders.
4) The results provide support for
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
This document discusses factors that influence the level of credit risk in Ethiopian commercial banks. It presents a conceptual framework that categorizes credit risk factors into three groups: quantity of credit risk, quality of credit risk management, and direction of credit risk.
The study uses a quantitative approach with descriptive and econometric techniques on data from 8 major Ethiopian banks from 1990-2012. Regression models are used to analyze the influence of factors in each group as well as a combined model.
The results show that quantity of risk and quality of risk management variables have more influence on credit risk levels, while direction variables have limited impact. Specifically, higher loan amounts, loan growth rates, and single borrower limits increased credit risk, while
Credit Risk and Financial Performance of Commercial Banks in Kenyarobert siriba
This document discusses a study on the relationship between credit risk and financial performance of commercial banks in Kenya from 2014-2018. It provides background on credit risk and how it can be measured using non-performing loans, loan loss provisions, and loans and advances. The study found that non-performing loans and loan loss provision had non-significant negative effects on bank profitability, while loans and advances had a significant positive impact. The document reviews relevant literature and theories around credit risk and financial performance.
This document summarizes a study that investigated the determinants of commercial bank lending behavior in Nigeria. The study aimed to test how common factors like deposits, investments, interest rates, reserve requirements, and liquidity ratios affect bank lending. Regression analysis found the model to be significant, with deposits having the greatest impact on lending. The study suggests banks focus on deposit mobilization to enhance lending performance and develop strategic plans.
An assessment of factors affecting banks’ risk exposure in north central nigeriaAlexander Decker
The document summarizes a study that assessed factors affecting banks' risk exposure in North Central Nigeria. The study identified five main factors through factor analysis: liquidity and interest, domestic market, international market, business operation, and credit. It recommends that banks consider these factors in developing effective risk management strategies to reduce potential losses.
This thesis investigates the determinants of lending behavior among commercial banks in Ethiopia. The author conducted a case study of eight commercial banks over the period of 2001 to 2013. Through a panel data regression analysis, the author found that deposit volume and bank size had a positive and significant impact on loans and advances. Liquidity ratio and interest rate had a negative and significant impact. Cash reserve requirements and inflation rate had a positive impact, though the relationship was unexpected. GDP growth did not have a statistically significant impact. The study suggests commercial banks focus on deposit mobilization to enhance lending.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
This document provides background information on a study about the effects of inflation on the profitability of commercial banks in Uganda. It discusses inflation and how it can reduce purchasing power. It also defines key terms like interest rates, lending, and consumer price index. The problem statement indicates that despite financial reforms, commercial bank performance in Uganda has remained poor due to high inflation, interest rates, and exchange rate volatility. The specific objectives are to determine the effects of exchange rates, interest rates, and consumer price index on bank profitability. The significance is that bank management can use the study to understand inflation's impacts and develop strategies to handle its effects.
International Journal of Business and Management Invention (IJBMI)inventionjournals
This document summarizes a study that examined the determinants of credit risk in the Tunisian banking sector from 2003-2011. The study found that:
1) Performance, audit opinion, and audit quality were significant determinants of credit risk levels in banks, with higher performance, unqualified audit opinions, and audits by large accounting firms associated with lower credit risk.
2) Information quality, as proxied by discretionary accruals, was not found to be related to credit risk levels.
3) The study tested these relationships using an ordinary least squares regression model with credit risk as the dependent variable and information quality, performance, size, listing status, audit opinion, and audit quality as independent variables
Factors Factors Influencing Credit Risk For Small And Medium Enterprise Loans...paperpublications3
Abstract: There has been an increased concern over high credit risk for small and medium enterprise loan in financial institutions. High interest rates, credit rating, recovery mechanisms and business experience play an important role in influencing credit risk for small and medium enterprise loans. The main objective of this study was to investigate factors influencing credit risk for small and medium enterprise loans a survey of banks in Kitale Town, Kenya. The specific objectives of the study were: To establish the influence of interest rates on credit risk of small and medium enterprise loans in banks, bto find out the influence of credit rating in credit risk of small and medium enterprise loans in banks, to establish the influence of recovery mechanism in credit risk of small and medium enterprise loans in banks, and to assess the influence of business experience in credit risk of small and medium enterprise loans in banks. Credit management theory, trade-off theory, modern portfolio theory were used to underpin the study. Explanatory research design was used in this study. The study targeted 331 employees from 11 Commercial Banks in Kitale. The study used stratified sampling technique. Interest rates, credit rating, recovery mechanism and business experience were taken as the independent variables while credit risk was the dependent variable. Pilot study was used to test the validity and reliability of the research instrument. Interest rates showed a positive and significant effect on credit risk (β= 0.153, ρ<0.05).><0.05).><0.05).><0.05). In conclusion, the study has established that whenever there are high short-term interest rates, there is an increase in credit risk. In addition, interest rate shifts are heterogeneous across the firm and have different implications for leverage and default in the short run than in the longer run. Hence the study recommends for need for a comprehensive risk management process that ensures the timely identification, measurement, monitoring, and control of risk.
Given the continued poor performance experienced in the banking sector as indicated by high levels of credit risk, poor quality loans and high incidence of non-performing loans, in spite of the frequent reforms that various governments in Nigeria have embarked upon, there is the need to constantly examine and analyse the factors that could affect bank performance with the aim of providing empirical evidence based on which solutions can be proffered. The paper examined the impact of asset quality management on the performance of deposit money banks in Nigeria. The paper adopted the ECM and co-integration techniques using annual aggregate data sourced from the CBN and the NDIC publications for the period 1990-2013. The findings of the study indicate that the selected measures of asset quality have significant impact on all the three indicators of bank performance namely- return on equity, return on total assets and return on shareholders’ fund respectively. In addition, the results of the impulse response and variance decomposition show that own shocks from the performance indicators ROE, ROTA and ROSF account for a greater proportion of the forecast errors of the variables within the ten-year forecast period. In the light of the above, it is recommended that deposit money banks in Nigeria should intensify their efforts in designing and implementing good asset quality management policies in order to further improve on their performance. This can be through human capacity building for personnel in the form of frequent professional training as well as strict adherence to the prudential guidelines.
This summary provides the key points from the document in 3 sentences:
The document discusses a study that investigates the determinants of bank lending behavior in Ghana. Using an econometric model, the study finds that bank size, capital structure, and competition have a positive relationship with bank lending, while macroeconomic indicators like interest rates and exchange rates negatively impact lending. The study contributes to understanding how bank-specific, macroeconomic, and industry factors influence bank lending decisions in an emerging market context like Ghana.
Effect of Credit Risk Management Practices on Profitability of Listed Commerc...iosrjce
The study sought to analyze the effect of credit risk management practices on profitability of listed
commercial banks at Nairobi Security Exchange in Kenya. A descriptive research design was adopted. The
population comprised of listed commerical banks where a sample of 55 employees was purposively sampled. It
was established that credit appraisal practices had a significant positive effect on profitability and that it
explained 14.4% of the variations in profitability. The results also found that credit monitoring had a
significative positive effect on profitability and that 47.8% of the variance in profitability. The findings further,
indicated that debt collection practices had a positive and significant relationship and explained 17.4% of the
variations in profitability. Lastly, the results indicated that credit risk governance had a positive and significant
effect on profitability. Based on the study findings the study concluded that credit appraisal, debt collection and
credit risk governance have a significant positive effect on profitability. It is thus recommended that commercial
banks should have stringent credit appraisal and debt collection policies, credit personnel at all levels must
work in co-ordination in order to ensure that credit is collected in a timely manner and banks should also adopt
credit risk governance frameworks which can be attained by making the process of interaction between senior
management and the Board more effective
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
Determinants of commercial banks lending evidence from ethiopian commercial b...Alexander Decker
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
This document appears to be an introduction and outline for an MSc dissertation on the role of financial regulations in the risk and profit efficiency of commercial banks in the U.S. It provides background on bank regulations and non-performing loans. The methodology will use data envelopment analysis and regression models to analyze how regulations impact efficiency and risk for large and small banks from 2002-2015. Preliminary results found that higher provision coverage reduced risk for large banks, while higher capital and leverage ratios increased efficiency and reduced risk for small banks. Overall, the dissertation aims to examine the tradeoff between bank efficiency and risk under different financial regulations.
Credit Risk and Profitability of Selected Banks in GhanaSamuel Agyei
This document summarizes a study that examines the relationship between credit risk and profitability of selected banks in Ghana from 2005-2009. The study found that credit risk, as measured by non-performing loan rates, net charge-off rates, and pre-provision profit as a percentage of loans, had a positive and significant relationship with bank profitability in Ghana. This indicates that Ghanaian banks enjoyed high profitability despite high credit risk, contrary to previous studies. The results were attributed to the high lending/interest rates and fees charged by Ghanaian banks. The study also found support for bank size, growth, and capital influencing profitability positively and significantly.
CREDIT QUALITY IN INDIAN BANKING :QUANTITATIVE EVALUATIONDinabandhu Bag
This document summarizes a study examining factors that influence credit quality and non-performing loans in Indian banking. The study finds:
1) Both economic factors and bank-specific factors like capital adequacy ratios and credit deposit ratios influence credit quality and non-performing assets.
2) Analyzing data from 2002-2007 for 17 major Indian banks, the study finds higher capital adequacy ratios and credit deposit ratios are associated with lower non-performing loans.
3) Stronger economic growth, as measured by GDP growth, is also associated with lower non-performing loans for banks. The results provide insights into how banks can maintain better credit quality.
Credit risk and profitability of selected banks in ghanaAlexander Decker
This document summarizes a research study that examined the relationship between credit risk and profitability of selected banks in Ghana from 2005-2009. The study found that credit risk indicators like non-performing loan rates and net charge-off rates had a positive and significant relationship with bank profitability in Ghana, contrary to previous studies. This indicates that Ghanaian banks enjoy high profitability despite high credit risk. The results can be attributed to the high lending/interest rates and fees charged by Ghanaian banks. The study also found that bank size, growth, and capitalization positively influence bank profitability as supported by previous research.
Macroeconomic and industry determinants of interest rate spread empirical evi...Alexander Decker
This document summarizes a study that examines the bank-specific, industry-specific, and macroeconomic factors that influence interest rate spreads in Ghanaian commercial banks from 1990 to 2010. The study uses data from 33 commercial banks over this 21-year period. Key findings include that interest rate spreads are significantly influenced by bank ownership, management efficiency, GDP per capita, and government securities. Government borrowing also influences spreads but has a negative effect. The paper aims to identify important determinants of interest rate spreads for central banks, commercial banks, and economic managers in Ghana.
This paper examines how banking sector concentration impacts monetary policy transmission through the bank lending channel using bank-level panel data from 13 countries from 1999 to 2011. The main finding is that higher banking concentration weakens the effectiveness of monetary policy, though this effect decreases during crisis periods. The paper discusses how factors like banks' access to funds, profit margins, and bargaining power impact the relationship between concentration and monetary policy transmission. It has implications for how monetary policy should be implemented based on a country's concentration level.
Determinants of Banks’ Financial Performance: A Comparative Study between Nat...inventionjournals
Financial performance is one of the most critical factors having impact on the decision making of the resource providers. And thus to ensure the existence in the ever growing competitive business environment, every institution should be more concerned about the factors affecting their financial performance. This paper specially focuses on identifying the factors having impact on the financial performance of the commercial banks operating in Bangladesh. An effort has also been exerted to determine whether the extent of influence of various factors on financial performance varies with respect to local private and nationalized commercial banks. For this purpose 10 local private commercial banks (PCB) and all nationalized commercial banks (NCB) have been taken covering the period from 2008-2014. Here, data has been collected from the annual reports of the banks under consideration. To draw conclusion a multiple regression has been run by considering financial performance (profitability) as dependent variable and operating efficiency, asset utilization , liquidity, credit risk, capital adequacy and size of the company as independent variables. The study finds that asset utilization and operating efficiency have significant positive impact on banks' financial performance (profitability) whereas credit risk has significant negative impact. However, for PCBs asset utilization is the most critical factor to performance. On the other hand, result shows that in case of NCB 1 taka increase in credit risk is responsible for negative return of 0.968 taka. It is found that financial performance has no significant relationship with size and liquidity of the banks
The aim of this paper is to analyze the liquidity levels of various banks in the UAE for the period 2005-2009. To understand the behavior of liquidity indicators especially during the financial crisis, the researcher will analyze the four liquidity indicators over the years 2005 to 2009. The findings highlight how the banks in question have been impacted by the 2007-2008 crisis. This can most obviously be seen in the notable decline of each of the banks liquidity level in 2009. The effect of loans to total assets, loans to customers’ deposit, and investment to total assets ratios for the five banks was most notable in 2009. Two liquidity ratios were analyzed in order to determine the banks’ ability to honor its debt obligations, these being loans to total assets and loans to customers respectively. The third ratio was the total equity to total assets to assess the liquidity level in the capital structure, while the fourth ratio was the investment to total assets to measure the managing of liquidity. While Bank liquidity was affected by the crisis, bank performance remained relatively stable, as measured by coefficient of variation, since these banks were able to yield more control over cash flows in comparison to revenues and costs.
The aim of this paper is to examine the impact of bank minimum capital requirement on credit supply in Ivory Coast, over the period from 1982 to 2016. To this end, the ARDL method was used to study the nature of the relationship between our explanatory variables and bank credit supply in Ivory Coast. The study indicates some major results. The results showed that in the short term, real GDP per capita and bank size influence credit supply in Ivory Coast. Real GDP per capita acts negatively on credit supply in the short run while bank size has a positive influence on banks’ capacity to finance the economy. In the long run, the Cooke ratio and the openness rate have an impact on bank credit supply in Ivory Coast. The recovery of bank minimum capital requirements positively influences bank credit supply while the openness of the economy negatively impacts banks’ ability to offer bank credit. In terms of economic policies implications, monetary authorities must enforce and respect the policy of increasing bank minimum capital requirements. They must encourage banks to increase their banking assets.
IMPACT OF CREDIT RISK ON PROFITABILITY A STUDY OF INDIAN PUBLIC SECTOR BANKSJessica Tanner
This document summarizes a research study that examined the impact of credit risk on the profitability of public sector banks in India from 2011 to 2016. The study found:
1) There was a significant positive relationship between return on assets (ROA) and capital adequacy ratio (CAR) and loan provisions to non-performing loans (LPNPL), but a significant negative relationship between ROA and non-performing loans ratio (NPLR).
2) The credit risk variables (CAR, NPLR, LPNPL) predicted 55.7% of the variation in ROA, indicating a significant impact of credit risk on profitability.
3) Among the credit risk indicators, N
This document summarizes a study that investigated the determinants of commercial bank lending behavior in Nigeria. The study aimed to test how common factors like deposits, investments, interest rates, reserve requirements, and liquidity ratios affect bank lending. Regression analysis found the model to be significant, with deposits having the greatest impact on lending. The study suggests banks focus on deposit mobilization to enhance lending performance and develop strategic plans.
An assessment of factors affecting banks’ risk exposure in north central nigeriaAlexander Decker
The document summarizes a study that assessed factors affecting banks' risk exposure in North Central Nigeria. The study identified five main factors through factor analysis: liquidity and interest, domestic market, international market, business operation, and credit. It recommends that banks consider these factors in developing effective risk management strategies to reduce potential losses.
This thesis investigates the determinants of lending behavior among commercial banks in Ethiopia. The author conducted a case study of eight commercial banks over the period of 2001 to 2013. Through a panel data regression analysis, the author found that deposit volume and bank size had a positive and significant impact on loans and advances. Liquidity ratio and interest rate had a negative and significant impact. Cash reserve requirements and inflation rate had a positive impact, though the relationship was unexpected. GDP growth did not have a statistically significant impact. The study suggests commercial banks focus on deposit mobilization to enhance lending.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
This document provides background information on a study about the effects of inflation on the profitability of commercial banks in Uganda. It discusses inflation and how it can reduce purchasing power. It also defines key terms like interest rates, lending, and consumer price index. The problem statement indicates that despite financial reforms, commercial bank performance in Uganda has remained poor due to high inflation, interest rates, and exchange rate volatility. The specific objectives are to determine the effects of exchange rates, interest rates, and consumer price index on bank profitability. The significance is that bank management can use the study to understand inflation's impacts and develop strategies to handle its effects.
International Journal of Business and Management Invention (IJBMI)inventionjournals
This document summarizes a study that examined the determinants of credit risk in the Tunisian banking sector from 2003-2011. The study found that:
1) Performance, audit opinion, and audit quality were significant determinants of credit risk levels in banks, with higher performance, unqualified audit opinions, and audits by large accounting firms associated with lower credit risk.
2) Information quality, as proxied by discretionary accruals, was not found to be related to credit risk levels.
3) The study tested these relationships using an ordinary least squares regression model with credit risk as the dependent variable and information quality, performance, size, listing status, audit opinion, and audit quality as independent variables
Factors Factors Influencing Credit Risk For Small And Medium Enterprise Loans...paperpublications3
Abstract: There has been an increased concern over high credit risk for small and medium enterprise loan in financial institutions. High interest rates, credit rating, recovery mechanisms and business experience play an important role in influencing credit risk for small and medium enterprise loans. The main objective of this study was to investigate factors influencing credit risk for small and medium enterprise loans a survey of banks in Kitale Town, Kenya. The specific objectives of the study were: To establish the influence of interest rates on credit risk of small and medium enterprise loans in banks, bto find out the influence of credit rating in credit risk of small and medium enterprise loans in banks, to establish the influence of recovery mechanism in credit risk of small and medium enterprise loans in banks, and to assess the influence of business experience in credit risk of small and medium enterprise loans in banks. Credit management theory, trade-off theory, modern portfolio theory were used to underpin the study. Explanatory research design was used in this study. The study targeted 331 employees from 11 Commercial Banks in Kitale. The study used stratified sampling technique. Interest rates, credit rating, recovery mechanism and business experience were taken as the independent variables while credit risk was the dependent variable. Pilot study was used to test the validity and reliability of the research instrument. Interest rates showed a positive and significant effect on credit risk (β= 0.153, ρ<0.05).><0.05).><0.05).><0.05). In conclusion, the study has established that whenever there are high short-term interest rates, there is an increase in credit risk. In addition, interest rate shifts are heterogeneous across the firm and have different implications for leverage and default in the short run than in the longer run. Hence the study recommends for need for a comprehensive risk management process that ensures the timely identification, measurement, monitoring, and control of risk.
Given the continued poor performance experienced in the banking sector as indicated by high levels of credit risk, poor quality loans and high incidence of non-performing loans, in spite of the frequent reforms that various governments in Nigeria have embarked upon, there is the need to constantly examine and analyse the factors that could affect bank performance with the aim of providing empirical evidence based on which solutions can be proffered. The paper examined the impact of asset quality management on the performance of deposit money banks in Nigeria. The paper adopted the ECM and co-integration techniques using annual aggregate data sourced from the CBN and the NDIC publications for the period 1990-2013. The findings of the study indicate that the selected measures of asset quality have significant impact on all the three indicators of bank performance namely- return on equity, return on total assets and return on shareholders’ fund respectively. In addition, the results of the impulse response and variance decomposition show that own shocks from the performance indicators ROE, ROTA and ROSF account for a greater proportion of the forecast errors of the variables within the ten-year forecast period. In the light of the above, it is recommended that deposit money banks in Nigeria should intensify their efforts in designing and implementing good asset quality management policies in order to further improve on their performance. This can be through human capacity building for personnel in the form of frequent professional training as well as strict adherence to the prudential guidelines.
This summary provides the key points from the document in 3 sentences:
The document discusses a study that investigates the determinants of bank lending behavior in Ghana. Using an econometric model, the study finds that bank size, capital structure, and competition have a positive relationship with bank lending, while macroeconomic indicators like interest rates and exchange rates negatively impact lending. The study contributes to understanding how bank-specific, macroeconomic, and industry factors influence bank lending decisions in an emerging market context like Ghana.
Effect of Credit Risk Management Practices on Profitability of Listed Commerc...iosrjce
The study sought to analyze the effect of credit risk management practices on profitability of listed
commercial banks at Nairobi Security Exchange in Kenya. A descriptive research design was adopted. The
population comprised of listed commerical banks where a sample of 55 employees was purposively sampled. It
was established that credit appraisal practices had a significant positive effect on profitability and that it
explained 14.4% of the variations in profitability. The results also found that credit monitoring had a
significative positive effect on profitability and that 47.8% of the variance in profitability. The findings further,
indicated that debt collection practices had a positive and significant relationship and explained 17.4% of the
variations in profitability. Lastly, the results indicated that credit risk governance had a positive and significant
effect on profitability. Based on the study findings the study concluded that credit appraisal, debt collection and
credit risk governance have a significant positive effect on profitability. It is thus recommended that commercial
banks should have stringent credit appraisal and debt collection policies, credit personnel at all levels must
work in co-ordination in order to ensure that credit is collected in a timely manner and banks should also adopt
credit risk governance frameworks which can be attained by making the process of interaction between senior
management and the Board more effective
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
Determinants of commercial banks lending evidence from ethiopian commercial b...Alexander Decker
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
This document appears to be an introduction and outline for an MSc dissertation on the role of financial regulations in the risk and profit efficiency of commercial banks in the U.S. It provides background on bank regulations and non-performing loans. The methodology will use data envelopment analysis and regression models to analyze how regulations impact efficiency and risk for large and small banks from 2002-2015. Preliminary results found that higher provision coverage reduced risk for large banks, while higher capital and leverage ratios increased efficiency and reduced risk for small banks. Overall, the dissertation aims to examine the tradeoff between bank efficiency and risk under different financial regulations.
Credit Risk and Profitability of Selected Banks in GhanaSamuel Agyei
This document summarizes a study that examines the relationship between credit risk and profitability of selected banks in Ghana from 2005-2009. The study found that credit risk, as measured by non-performing loan rates, net charge-off rates, and pre-provision profit as a percentage of loans, had a positive and significant relationship with bank profitability in Ghana. This indicates that Ghanaian banks enjoyed high profitability despite high credit risk, contrary to previous studies. The results were attributed to the high lending/interest rates and fees charged by Ghanaian banks. The study also found support for bank size, growth, and capital influencing profitability positively and significantly.
CREDIT QUALITY IN INDIAN BANKING :QUANTITATIVE EVALUATIONDinabandhu Bag
This document summarizes a study examining factors that influence credit quality and non-performing loans in Indian banking. The study finds:
1) Both economic factors and bank-specific factors like capital adequacy ratios and credit deposit ratios influence credit quality and non-performing assets.
2) Analyzing data from 2002-2007 for 17 major Indian banks, the study finds higher capital adequacy ratios and credit deposit ratios are associated with lower non-performing loans.
3) Stronger economic growth, as measured by GDP growth, is also associated with lower non-performing loans for banks. The results provide insights into how banks can maintain better credit quality.
Credit risk and profitability of selected banks in ghanaAlexander Decker
This document summarizes a research study that examined the relationship between credit risk and profitability of selected banks in Ghana from 2005-2009. The study found that credit risk indicators like non-performing loan rates and net charge-off rates had a positive and significant relationship with bank profitability in Ghana, contrary to previous studies. This indicates that Ghanaian banks enjoy high profitability despite high credit risk. The results can be attributed to the high lending/interest rates and fees charged by Ghanaian banks. The study also found that bank size, growth, and capitalization positively influence bank profitability as supported by previous research.
Macroeconomic and industry determinants of interest rate spread empirical evi...Alexander Decker
This document summarizes a study that examines the bank-specific, industry-specific, and macroeconomic factors that influence interest rate spreads in Ghanaian commercial banks from 1990 to 2010. The study uses data from 33 commercial banks over this 21-year period. Key findings include that interest rate spreads are significantly influenced by bank ownership, management efficiency, GDP per capita, and government securities. Government borrowing also influences spreads but has a negative effect. The paper aims to identify important determinants of interest rate spreads for central banks, commercial banks, and economic managers in Ghana.
This paper examines how banking sector concentration impacts monetary policy transmission through the bank lending channel using bank-level panel data from 13 countries from 1999 to 2011. The main finding is that higher banking concentration weakens the effectiveness of monetary policy, though this effect decreases during crisis periods. The paper discusses how factors like banks' access to funds, profit margins, and bargaining power impact the relationship between concentration and monetary policy transmission. It has implications for how monetary policy should be implemented based on a country's concentration level.
Determinants of Banks’ Financial Performance: A Comparative Study between Nat...inventionjournals
Financial performance is one of the most critical factors having impact on the decision making of the resource providers. And thus to ensure the existence in the ever growing competitive business environment, every institution should be more concerned about the factors affecting their financial performance. This paper specially focuses on identifying the factors having impact on the financial performance of the commercial banks operating in Bangladesh. An effort has also been exerted to determine whether the extent of influence of various factors on financial performance varies with respect to local private and nationalized commercial banks. For this purpose 10 local private commercial banks (PCB) and all nationalized commercial banks (NCB) have been taken covering the period from 2008-2014. Here, data has been collected from the annual reports of the banks under consideration. To draw conclusion a multiple regression has been run by considering financial performance (profitability) as dependent variable and operating efficiency, asset utilization , liquidity, credit risk, capital adequacy and size of the company as independent variables. The study finds that asset utilization and operating efficiency have significant positive impact on banks' financial performance (profitability) whereas credit risk has significant negative impact. However, for PCBs asset utilization is the most critical factor to performance. On the other hand, result shows that in case of NCB 1 taka increase in credit risk is responsible for negative return of 0.968 taka. It is found that financial performance has no significant relationship with size and liquidity of the banks
The aim of this paper is to analyze the liquidity levels of various banks in the UAE for the period 2005-2009. To understand the behavior of liquidity indicators especially during the financial crisis, the researcher will analyze the four liquidity indicators over the years 2005 to 2009. The findings highlight how the banks in question have been impacted by the 2007-2008 crisis. This can most obviously be seen in the notable decline of each of the banks liquidity level in 2009. The effect of loans to total assets, loans to customers’ deposit, and investment to total assets ratios for the five banks was most notable in 2009. Two liquidity ratios were analyzed in order to determine the banks’ ability to honor its debt obligations, these being loans to total assets and loans to customers respectively. The third ratio was the total equity to total assets to assess the liquidity level in the capital structure, while the fourth ratio was the investment to total assets to measure the managing of liquidity. While Bank liquidity was affected by the crisis, bank performance remained relatively stable, as measured by coefficient of variation, since these banks were able to yield more control over cash flows in comparison to revenues and costs.
The aim of this paper is to examine the impact of bank minimum capital requirement on credit supply in Ivory Coast, over the period from 1982 to 2016. To this end, the ARDL method was used to study the nature of the relationship between our explanatory variables and bank credit supply in Ivory Coast. The study indicates some major results. The results showed that in the short term, real GDP per capita and bank size influence credit supply in Ivory Coast. Real GDP per capita acts negatively on credit supply in the short run while bank size has a positive influence on banks’ capacity to finance the economy. In the long run, the Cooke ratio and the openness rate have an impact on bank credit supply in Ivory Coast. The recovery of bank minimum capital requirements positively influences bank credit supply while the openness of the economy negatively impacts banks’ ability to offer bank credit. In terms of economic policies implications, monetary authorities must enforce and respect the policy of increasing bank minimum capital requirements. They must encourage banks to increase their banking assets.
IMPACT OF CREDIT RISK ON PROFITABILITY A STUDY OF INDIAN PUBLIC SECTOR BANKSJessica Tanner
This document summarizes a research study that examined the impact of credit risk on the profitability of public sector banks in India from 2011 to 2016. The study found:
1) There was a significant positive relationship between return on assets (ROA) and capital adequacy ratio (CAR) and loan provisions to non-performing loans (LPNPL), but a significant negative relationship between ROA and non-performing loans ratio (NPLR).
2) The credit risk variables (CAR, NPLR, LPNPL) predicted 55.7% of the variation in ROA, indicating a significant impact of credit risk on profitability.
3) Among the credit risk indicators, N
This document outlines a research proposal that examines the relationship between bank governance, financial disclosure, and bank sustainability in Ghana and South Africa. The proposal consists of 7 sections that describe the background and problem statement, objectives, research questions, methodology, significance, and limitations of the study. Specifically, the study aims to investigate how bank governance and financial disclosure relate to bank sustainability, as well as their interactive effects, using annual data from commercial banks in Ghana and South Africa from 2012 to 2022. The findings could provide insights for regulators, banks, and researchers regarding governance and transparency practices.
Lending is a risky principal business activity for
banks as repayment can seldom be fully guaranteed. The study
seeks to examine impact of borrower character on loan
repayment in commercials Banks – in Kakamega town,
Kakamega County. It examined impact of borrower character on
loan repayment in commercial banks within Kakamega town. A
cross-sectional survey design with a sample of 105 respondents
was selected using purposive sampling and simple random
sampling. The study may add to the already existing literature on
effects borrower character, and loan repayment; enable
commercial banks identify the credit management policies that
are critical in the lending business; lending policy formulation
and assessment of its loan risk management abilities ; may
provide guidance to the Central Bank and other regulators in the
credit risk management, policy formulation and to stimulate
further research into the area of lending policy formulation and
performance of loans. A self-administered questionnaire was used
to collect the data, processed and analyzed using the Statistical
Package for Social Sciences (SPSS V22). It has been established
that there is a strong positive relationship between borrower
character on loan repayment. Evidence from the study suggests
that borrower character greatly influences loan repayment.
The literature shows little evidence on the effects of the business model upon the volatility of banks in developing and fast growing economies. Hence, this study examines the effects of busi-ness model choice on bank’s stability in ASEAN countries. Using GMM and other robust econo-metric methods on the sample of 99 joint stock commercial banks, we find significant and nega-tive impacts of diversification model in which bank shifts toward non – interest and fee – based activities. We also find that the impacts are different between two groups of countries. For Vi-etnam, Indonesia and the Philippines, the diversification entails negative impacts on the stability while demonstrating positive impacts for Thailand and Malaysia. Upon the findings, we draw policy implications for a more sustainable development in ASEAN banking business.
DIVERGENCE IN COMMERCIAL BANK LENDING DIMENSIONS: EMPIRICAL STUDY ON ETHIOPIAIAEME Publication
Quite a number of studies in the past in various countries accentuated the significance of demographic variables in lending decisions of bank-officials. Do the dimensions of commercial bank lending diverge by gender, age-group, banking experience, sector of the bank, and designation held by bank-officials in Ethiopia? This is the key issue that is tried to be answered by empirical testing in this study. For the purpose of this descriptive study of cross-sectional design, data were collected by means of a pilot-tested questionnaire from bank-officials across the country between February and July 2015.
Determinants of Bank Failure in Nigeria: An Empirical InvestigationAJHSSR Journal
This study investigates the determinants of bank failure in Nigeria from 1970-2013. It uses
Autoregressive Distributed Lag (ARDL) approach in the analysis and further examines the extent to which these
determinants lead to bank failure in Nigeria. The study found that there is significant long run relationship between
bank failure and exchange rate, interest rate, capital adequacy ratio, non-performing loans and liquidity ratio, but an
insignificant relationship with inflation in Nigeria. On the direction of causality, the study found a bidirectional
causal relationship between bank failure and, capital adequacy ratio and non-performing loans (NPL), while a
unidirectional causal relationship was found between bank failure and exchange rate but shows no causal
relationship between bank failure and, inflation and interest rate. The study therefore conclude that bank failure is
chiefly determined by capital adequacy ratio (CAR), exchange rate, interest rate and liquidity ratio in Nigeria, and
that Non-Performing Loans (NPL) leads to the degradation of the financial sector thereby making the financial
institutions vulnerable to failure. It is recommended that monetary authorities in Nigeria must ensure that all banks
operating in the country comply with the CAR guideline to guard against sudden bank failure, and that financial
institutions should make sure that all necessary checks prior to the advancement of credit such as adequate
collateral and viable financial projection be dully carried out and satisfied in order to forestall the incidence of bank
failure in Nigeria.
Causal Relationship between Lending Rate and Deposit Rate in Bangladesh: An E...iosrjce
IOSR Journal of Economics and Finance (IOSR-JEF) discourages theoretical articles that are limited to axiomatics or that discuss minor variations of familiar models. Similarly, IOSR-JEF has little interest in empirical papers that do not explain the model's theoretical foundations or that exhausts themselves in applying a new or established technique (such as cointegration) to another data set without providing very good reasons why this research is important.
Causal Relationship between Lending Rate and Deposit Rate in Bangladesh: An E...iosrjce
This study attempts to examine the causal relationship between lending rate and deposit rate in
Bangladesh for the period of 2003:07 to 2015:06. After collecting monthly data of lending rate and deposit rate,
the study employed Augmented Dickey-Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski-Phillips-SchmidtShin
(KPSS) tests for testing the stationarity of the series, Johansen Cointegration test to visualize the long run
relationship between the two variables, Granger causality test to investigate the existence and direction of
causality between the variables and impulse response function on a structured Vector Autoregressive (VAR)
model to know the reaction of one variable to an impulse in other. The results of the unit root tests show that the
series are non-stationary at level form but after differentiating they become stationary. Cointegration test shows
the absence of long run equilibrium relationships between the two variables. The Granger causality test
provides evidence that there is a unidirectional causality running from lending rate to deposit rate but not the
way round. And the impulse response function shows significant reaction of variables due to one standard
deviation shock to the error terms of the VAR model
Credit exposure and lending decision quality of private commercial banks in b...Alexander Decker
This document summarizes a research study that examined the level of credit exposure and lending decision quality of local private commercial banks in Bangladesh from 2007-2011. The study used five financial ratios to measure credit performance: non-performing loan to total loan ratio, loan loss reserve to total loan ratio, loan loss reserve to non-performing loan ratio, capital adequacy ratio, and tier 1 capital ratio. An analysis of variance found that the non-performing loan to total loan ratio, loan loss reserve to total loan ratio, and loan loss reserve to non-performing loan ratio differed significantly between conventional and Islamic banks, while the capital adequacy ratio and tier 1 capital ratio did not differ significantly. The study also found an
STRESS TESTING IN BANKING SECTOR FRAMEWORKDinabandhu Bag
This document summarizes a study analyzing default correlation in retail banking portfolios in India. It discusses:
1) Literature on default correlation and factor modeling approaches to estimate correlation. Previous studies found correlation varies over time and across industries/ratings.
2) Analysis of a test portfolio with 4 retail segments showing migration of exposures between segments over 14 months. Segments showed varying default rate trends over time.
3) The study builds a multi-factor linear model to test if external economic factors significantly impact default correlations between segments over time.
Lesson 6 Discussion Forum Discussion assignments will beDioneWang844
Lesson 6 Discussion Forum :
Discussion assignments will be graded based upon the criteria and rubric specified in the Syllabus.
550 Words
For this Discussion Question, complete the following.
1. Review the two articles about bank failures and bank diversification that are found below this. Economic history assures us that the health of the banking industry is directly related to the health of the economy. Moreover, recessions, when combined with banking crisis, will result in longer and deeper recessions versus recessions that do occur with a healthy banking industry.
2. Locate two JOURNAL articles which discuss this topic further. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.
3. Summarize these journal articles. Please use your own words. No copy-and-paste. Cite your sources.
Please post (in APA format) your article citation.
Reply to Post 1: 160 words and Reference
Discussion on Bank’s failures and its diversification
Over the last two decades, business cycle volatility has decreased in the US. For example, some analysts claimed that companies handle inventory better today than ever, or that advances in financial systems have helped smooth industry volatility. Some emphasized stronger economic policy. Banking changes were also drastic in this same era, contributing to the restructuring and convergence of massive, global banking institutions in a better-organized structure. The article (Strahan, 2006) points out that some regulatory reform driven by individual countries rendered it possible for banks to preserve their resources and income by gradually diversifying from local downturns. Both low state volatility rates and a decline in partnerships between the local market and the central banking sector is a net influence on the diversification in banks. Considering the less fragile state economies following these intergovernmental financial reforms, there are some signs that financial convergence – while certainly not the only piece of the puzzle – has been less unpredictable.
Another article (Walter, 2005) argues that a long-standing reason for bank collapses during the crisis is a contagion, which contributes to systemic bank failures and the collapse of one bank initially. This indicates why several losses in the crisis period were unintentional, which ensured that the banks remained stable and endured without contagion-induced falls. The response to the contagion was the central government’s deposit policy, bringing an end to defaults. Nevertheless, since the sequence of errors began in the early 1920s, well before contagion was evident, the underlying trigger must be contagion.
Now it seems like the bank sector has undergone a shake-out that was worsened during the crisis by the deteriorating economic conditions. Although the reality that incidents occurred almost syno ...
Macroeconomic factors that affect the quality of lending in albania.Alexander Decker
This document analyzes the relationship between macroeconomic factors and credit quality in the Albanian banking system from 2005 to 2013. It finds that non-performing loan rates increased, influenced by the economic slowdown after 2008 and currency depreciation. Unemployment, lower GDP growth, reduced remittances, and inflation stability negatively impacted borrowers' ability to repay loans. A regression analysis showed credit risk significantly increased when GDP growth declined and interest rates rose. Macroeconomic changes, like deteriorating GDP growth, substantially affected the level of non-performing loans in Albanian banks.
This document summarizes a research study that investigates the effects of bank diversification, size, and the global financial crisis on risk-taking and performance in emerging economies. The study uses data from 542 bank-years in Bangladesh and South Africa between 2004-2015. The key findings are:
1) Higher non-performing loan ratios make banks less profitable and more unstable.
2) Benefits from bank diversification vary and confirm portfolio diversification theory.
3) Small banks in Bangladesh gain more from diversification than large banks, while large banks in South Africa gain more than small banks.
4) During financial crises, emerging economies can use diversification to control risk and improve performance
This document discusses risk management practices in the Indian banking system and supervision by the Reserve Bank of India (RBI). It provides an overview of the types of risks banks face, including credit, market, and operational risks. The document also summarizes several academic studies that have examined relationships between macroeconomic variables, bank performance, and risk. Overall, the document analyzes current risk management practices of banks in India as directed by RBI guidelines and regulations.
Financial Risk and Financial Performance A Critical Analysis of Commercial Ba...ijtsrd
Regardless developed or developing, banking sector serves as the spine of the economy of a country. Financial risks played a major role in the global banking crisis which occurred in the past decades. After which financial risks remained a major topic of interest globally. This in turn threatens their financial viability. The country’s banking sector is vulnerable to risks whether it is financial or non financial. This made it essential to include operational risk as area of study along with other financial risks as the risk cannot be ignored. This study therefore, investigated the effect of financial risk on financial performance of commercial banks listed in Rwanda Stock Exchange. The study used financial distress theory, interest rate parity theory, shift ability theory and stewardship theory Descriptive research design is used in the study. Target population of the study constituted all the banks listed in Rwanda Stock Exchange. The study used random panel technique for panelling data for the period of 2008 to 2019. Data was analysed through the use of descriptive statistics and multiple linear regression analysis. From table 4.12 of coefficients, solvency risk amongst the sub variables was highly influenced by financial performance which reported a t value of 3.188 hence the most significant. Dr. Umamaheswari K | Dr. Vidhya K | Dr. Neelam Maurya "Financial Risk & Financial Performance: A Critical Analysis of Commercial Banks Listed in Rwanda Stock Exchange" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-6 | Issue-4 , June 2022, URL: https://www.ijtsrd.com/papers/ijtsrd50288.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/50288/financial-risk-and-financial-performance-a-critical-analysis-of-commercial-banks-listed-in-rwanda-stock-exchange/dr-umamaheswari-k
How corporate diversification affects excess value and excess profitabilityAlexander Decker
This document summarizes a study that examined the relationship between excess value and excess profitability among deposit money banks in Nigeria from 1998-2007. The study used regression and correlation analyses of accounting data from 18 sampled banks. The analyses revealed a positive and statistically significant correlation, indicating a relationship between excess value and excess profitability for both diversified and standalone banks. Prior literature on the costs and benefits of corporate diversification was reviewed. The study aimed to measure this relationship for Nigerian banks and hypothesized no significant relationship, which the analyses did not support.
Asset liability management in indian private sector banks-a canonical correlatiIAEME Publication
This document summarizes an article from the International Journal of Management about asset-liability management in Indian private sector banks. It discusses the risks banks face from mismatches between short-term liabilities and long-term assets, and how canonical correlation analysis was used on 3 private banks to analyze the relationship between predictor variables like deposits and predictive variables like loans. The analysis found that except for ICICI Bank, the other banks were in a safer position with long-term predictors and predictives.
Similar to The moderating role of bank performance indicators on credit risk of indian public sector banks (20)
Abnormalities of hormones and inflammatory cytokines in women affected with p...Alexander Decker
Women with polycystic ovary syndrome (PCOS) have elevated levels of hormones like luteinizing hormone and testosterone, as well as higher levels of insulin and insulin resistance compared to healthy women. They also have increased levels of inflammatory markers like C-reactive protein, interleukin-6, and leptin. This study found these abnormalities in the hormones and inflammatory cytokines of women with PCOS ages 23-40, indicating that hormone imbalances associated with insulin resistance and elevated inflammatory markers may worsen infertility in women with PCOS.
A usability evaluation framework for b2 c e commerce websitesAlexander Decker
This document presents a framework for evaluating the usability of B2C e-commerce websites. It involves user testing methods like usability testing and interviews to identify usability problems in areas like navigation, design, purchasing processes, and customer service. The framework specifies goals for the evaluation, determines which website aspects to evaluate, and identifies target users. It then describes collecting data through user testing and analyzing the results to identify usability problems and suggest improvements.
A universal model for managing the marketing executives in nigerian banksAlexander Decker
This document discusses a study that aimed to synthesize motivation theories into a universal model for managing marketing executives in Nigerian banks. The study was guided by Maslow and McGregor's theories. A sample of 303 marketing executives was used. The results showed that managers will be most effective at motivating marketing executives if they consider individual needs and create challenging but attainable goals. The emerged model suggests managers should provide job satisfaction by tailoring assignments to abilities and monitoring performance with feedback. This addresses confusion faced by Nigerian bank managers in determining effective motivation strategies.
A unique common fixed point theorems in generalized dAlexander Decker
This document presents definitions and properties related to generalized D*-metric spaces and establishes some common fixed point theorems for contractive type mappings in these spaces. It begins by introducing D*-metric spaces and generalized D*-metric spaces, defines concepts like convergence and Cauchy sequences. It presents lemmas showing the uniqueness of limits in these spaces and the equivalence of different definitions of convergence. The goal of the paper is then stated as obtaining a unique common fixed point theorem for generalized D*-metric spaces.
A trends of salmonella and antibiotic resistanceAlexander Decker
This document provides a review of trends in Salmonella and antibiotic resistance. It begins with an introduction to Salmonella as a facultative anaerobe that causes nontyphoidal salmonellosis. The emergence of antimicrobial-resistant Salmonella is then discussed. The document proceeds to cover the historical perspective and classification of Salmonella, definitions of antimicrobials and antibiotic resistance, and mechanisms of antibiotic resistance in Salmonella including modification or destruction of antimicrobial agents, efflux pumps, modification of antibiotic targets, and decreased membrane permeability. Specific resistance mechanisms are discussed for several classes of antimicrobials.
A transformational generative approach towards understanding al-istifhamAlexander Decker
This document discusses a transformational-generative approach to understanding Al-Istifham, which refers to interrogative sentences in Arabic. It begins with an introduction to the origin and development of Arabic grammar. The paper then explains the theoretical framework of transformational-generative grammar that is used. Basic linguistic concepts and terms related to Arabic grammar are defined. The document analyzes how interrogative sentences in Arabic can be derived and transformed via tools from transformational-generative grammar, categorizing Al-Istifham into linguistic and literary questions.
A time series analysis of the determinants of savings in namibiaAlexander Decker
This document summarizes a study on the determinants of savings in Namibia from 1991 to 2012. It reviews previous literature on savings determinants in developing countries. The study uses time series analysis including unit root tests, cointegration, and error correction models to analyze the relationship between savings and variables like income, inflation, population growth, deposit rates, and financial deepening in Namibia. The results found inflation and income have a positive impact on savings, while population growth negatively impacts savings. Deposit rates and financial deepening were found to have no significant impact. The study reinforces previous work and emphasizes the importance of improving income levels to achieve higher savings rates in Namibia.
A therapy for physical and mental fitness of school childrenAlexander Decker
This document summarizes a study on the importance of exercise in maintaining physical and mental fitness for school children. It discusses how physical and mental fitness are developed through participation in regular physical exercises and cannot be achieved solely through classroom learning. The document outlines different types and components of fitness and argues that developing fitness should be a key objective of education systems. It recommends that schools ensure pupils engage in graded physical activities and exercises to support their overall development.
A theory of efficiency for managing the marketing executives in nigerian banksAlexander Decker
This document summarizes a study examining efficiency in managing marketing executives in Nigerian banks. The study was examined through the lenses of Kaizen theory (continuous improvement) and efficiency theory. A survey of 303 marketing executives from Nigerian banks found that management plays a key role in identifying and implementing efficiency improvements. The document recommends adopting a "3H grand strategy" to improve the heads, hearts, and hands of management and marketing executives by enhancing their knowledge, attitudes, and tools.
This document discusses evaluating the link budget for effective 900MHz GSM communication. It describes the basic parameters needed for a high-level link budget calculation, including transmitter power, antenna gains, path loss, and propagation models. Common propagation models for 900MHz that are described include Okumura model for urban areas and Hata model for urban, suburban, and open areas. Rain attenuation is also incorporated using the updated ITU model to improve communication during rainfall.
A synthetic review of contraceptive supplies in punjabAlexander Decker
This document discusses contraceptive use in Punjab, Pakistan. It begins by providing background on the benefits of family planning and contraceptive use for maternal and child health. It then analyzes contraceptive commodity data from Punjab, finding that use is still low despite efforts to improve access. The document concludes by emphasizing the need for strategies to bridge gaps and meet the unmet need for effective and affordable contraceptive methods and supplies in Punjab in order to improve health outcomes.
A synthesis of taylor’s and fayol’s management approaches for managing market...Alexander Decker
1) The document discusses synthesizing Taylor's scientific management approach and Fayol's process management approach to identify an effective way to manage marketing executives in Nigerian banks.
2) It reviews Taylor's emphasis on efficiency and breaking tasks into small parts, and Fayol's focus on developing general management principles.
3) The study administered a survey to 303 marketing executives in Nigerian banks to test if combining elements of Taylor and Fayol's approaches would help manage their performance through clear roles, accountability, and motivation. Statistical analysis supported combining the two approaches.
A survey paper on sequence pattern mining with incrementalAlexander Decker
This document summarizes four algorithms for sequential pattern mining: GSP, ISM, FreeSpan, and PrefixSpan. GSP is an Apriori-based algorithm that incorporates time constraints. ISM extends SPADE to incrementally update patterns after database changes. FreeSpan uses frequent items to recursively project databases and grow subsequences. PrefixSpan also uses projection but claims to not require candidate generation. It recursively projects databases based on short prefix patterns. The document concludes by stating the goal was to find an efficient scheme for extracting sequential patterns from transactional datasets.
A survey on live virtual machine migrations and its techniquesAlexander Decker
This document summarizes several techniques for live virtual machine migration in cloud computing. It discusses works that have proposed affinity-aware migration models to improve resource utilization, energy efficient migration approaches using storage migration and live VM migration, and a dynamic consolidation technique using migration control to avoid unnecessary migrations. The document also summarizes works that have designed methods to minimize migration downtime and network traffic, proposed a resource reservation framework for efficient migration of multiple VMs, and addressed real-time issues in live migration. Finally, it provides a table summarizing the techniques, tools used, and potential future work or gaps identified for each discussed work.
A survey on data mining and analysis in hadoop and mongo dbAlexander Decker
This document discusses data mining of big data using Hadoop and MongoDB. It provides an overview of Hadoop and MongoDB and their uses in big data analysis. Specifically, it proposes using Hadoop for distributed processing and MongoDB for data storage and input. The document reviews several related works that discuss big data analysis using these tools, as well as their capabilities for scalable data storage and mining. It aims to improve computational time and fault tolerance for big data analysis by mining data stored in Hadoop using MongoDB and MapReduce.
1. The document discusses several challenges for integrating media with cloud computing including media content convergence, scalability and expandability, finding appropriate applications, and reliability.
2. Media content convergence challenges include dealing with the heterogeneity of media types, services, networks, devices, and quality of service requirements as well as integrating technologies used by media providers and consumers.
3. Scalability and expandability challenges involve adapting to the increasing volume of media content and being able to support new media formats and outlets over time.
This document surveys trust architectures that leverage provenance in wireless sensor networks. It begins with background on provenance, which refers to the documented history or derivation of data. Provenance can be used to assess trust by providing metadata about how data was processed. The document then discusses challenges for using provenance to establish trust in wireless sensor networks, which have constraints on energy and computation. Finally, it provides background on trust, which is the subjective probability that a node will behave dependably. Trust architectures need to be lightweight to account for the constraints of wireless sensor networks.
This document discusses private equity investments in Kenya. It provides background on private equity and discusses trends in various regions. The objectives of the study discussed are to establish the extent of private equity adoption in Kenya, identify common forms of private equity utilized, and determine typical exit strategies. Private equity can involve venture capital, leveraged buyouts, or mezzanine financing. Exits allow recycling of capital into new opportunities. The document provides context on private equity globally and in developing markets like Africa to frame the goals of the study.
This document discusses a study that analyzes the financial health of the Indian logistics industry from 2005-2012 using Altman's Z-score model. The study finds that the average Z-score for selected logistics firms was in the healthy to very healthy range during the study period. The average Z-score increased from 2006 to 2010 when the Indian economy was hit by the global recession, indicating the overall performance of the Indian logistics industry was good. The document reviews previous literature on measuring financial performance and distress using ratios and Z-scores, and outlines the objectives and methodology used in the current study.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
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The moderating role of bank performance indicators on credit risk of indian public sector banks
1. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.17, 2013
www.iiste.org
The Moderating Role of Bank Performance Indicators on Credit
Risk of Indian Public Sector Banks
Siraj K. K. 1 * Sudarsanan Pillai P.2 Rajitha Kumar S.3
1. Department of Business Studies, College of Technology, Sultanate of Oman
2. Chairman, Board of Studies in Commerce, Cochin University of Science and Technology, Cochin,
Kerala.
3. Associate Professor, School of Management Studies, Cochin University of Science and Technology,
Cochin, Kerala
* siraj@hotmail.co.in
Abstract
Credit risk is inherent in banking. With its pervasive impact, it poses significant threat to the existence, stability
and growth of the banking industry. The present study investigates the moderating role of various bank
performance indicators on the relationship between lending and credit risk, i.e., Non Performing Assets (NPA)
during the period 2000-01 to 2011-12. The study concentrates on Indian Public Sector Banks. Basically, NPA
results from advances. This relationship is often more complex because it is modified by the changes in both
bank performance indicators and macroeconomic indicators. The bank performance indicators moderate the
relationship between advances and NPA. In order to achieve the stated objectives, the study utilized correlation,
regression and ANOVA with moderation effect. The study revealed that the selected bank performance variables
exercise a moderating role in the relationship between advances and NPA. The conclusion derived from the
analysis can be utilized to improve the credit risk management in banks.
Keywords: Non Performing Assets, Advances, Moderation, Performance Indicators
JEL Classification Codes: G01; G21
1.0 Introduction
Over the past two decades, many empirical studies have been conducted on credit risk and its devastating role on
stability, growth and survival of commercial banks. These studies (Funso et al, 2012i; Kithinji, 2010ii; Boahene
et al, 2012iii) emphasized that credit risk has vicious effect and its incidence is critical for banking sector stability
and growth. Credit risk refers to the possibility that the actual return on an investment or loan extended will
deviate from that, which was expected (Conford, 2000 iv ). Although, credit risk is primarily related to
lending/advances of commercial banks, continuing interest among researchers and bank regulators motivated
studies on the role of macroeconomic variables and bank performance indicators on the credit risk of banks.
Such studies (Siraj and Pillai, 2013v; Thiagarajan et al, 2011vi) mostly concentrated on economic variables and
its impact on credit risk, measured using Non Performing Assets (NPA) of banks. The majority of these studies
emphasized that macroeconomic variables mediate the relationship between advances and NPA. It is also
evidenced by the fact that in a recessionary period, advances cause more NPA, while during economic progress,
higher advances need not result in higher NPAs.
As observed, few studies were available on effect of bank performance indicators on NPA of banks. Available
studies mostly utilize regression techniques to identify whether bank performance indicators such as capital,
borrowing, total assets, reserves etc. influence NPA. A shortcoming of these studies is that it considers these
performance indicators as independent variables, exercising control on NPA directly. Such an assumption is not
accurate. For example, higher borrowings do not influence NPA directly, but influence the lending since banks
will be more selective and concerned in their lending activities. It may be assumed that higher borrowings may
result in less NPA. In specific terms, the role of bank performance indicators can be seen as moderating in
nature. A moderator is a qualitative or quantitative variable that affects the direction and/or strength of the
relation between an independent or predictor variable and a dependent or criterion variable (Baron and Kenny,
1986vii).
With this background, in this research paper an attempt is made to study the role of bank performance indicators
in the relationship between Gross Advance and NPA of Indian Scheduled Commercial Banks (SCBs). In this
study multiple regression technique is used to find the significant moderating variables. A theoretical model is
developed considering Non Performing Assets as dependent variable and advances, bank performance indicators
and its interaction on advances as independent variables. The rest of the report is organized as follows. In section
two a brief review of available literature on the topic of study is presented. Section three explains the theoretical
model used, while Section four further illustrates the empirical NPA model. Section five highlights the research
methodology. Section six covers the data analysis and the last section concludes the study with major findings.
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2. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.17, 2013
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2. Literature Review
Credit risk hinders credit growth and affects growth of the banking sector. Credit risk means the potential loss
due to the nonperformance of a financial contract, or financial aspects of nonperformance in any contracts. For
banks, credit risk normally dwell in the assets in its banking book. Credit risk forces banks to provide higher
provisions to withstand potential losses, loan restructuring, loan moratorium and above all is a major reason for
recessionary pressures and financial crisis.
The credit risk of banks in emerging economy is higher than that in developed economies and the risk is formed
by a large number of bank-specific factors in emerging economies compared to their counterparts (Ahmad and
Ariff, 2007 viii ). Banking crisis is significantly affected by the macroeconomic environment: the credit risk
increases when there is growth in GDP and the share price indices decrease and rise when the unemployment
rate, interest rate, and credit growth increase; it is also positively affected by an appreciation of the real exchange
rate; moreover, there exists a substantial increase in the credit risk during the recent financial crisis period
(Castro, 2012 ix ). A set of studies on credit risk have identified the role of international and national
macroeconomic variables and a set of bank specific variables in forming bank’s credit risk (Demirguc-Kunt,
1989x; Kraft and Jankov, 2005xi). There is a significant inverse relationship between the GDP and the credit risk
for both public and private sector banks. Both macroeconomic and bank specific factors play crucial role in
determining the credit risk of the commercial banking sector (Thiagarajan et al, 2011xii). Further, many research
studies have analyzed the role of macroeconomic factors influencing credit risk of banks. Such studies confirmed
that macroeconomic variables significantly influence credit risk (Salas and Saurina, 2002 xiii ; Jimenez and
Saurina, 2006xiv; Nkuzu, 2011xv).
Thus, literature on credit risk mostly discusses the role of macroeconomic linkages in explaining the behavior of
credit risk. A review of these literatures pointed out the need for further study, since most of these studies
focussed on macro economic linkages on credit risk, and few studies have conducted on linkage between credit
risk and bank performance indicators. Even though many studies have concluded that bank performance
indicators are critical in explaining credit risk, studies does not concentrate further on this aspect. Also, there
exists studies which highlighted the relevance of bank performance indicators (Ahmad and Ariff, 2007) over
macroeconomic indicators in explaining credit risk in developing or emerging economies.
Review of literature also shows that in earlier studies limited attention was given on the role of bank
performance indicators on the credit risk of banks. Credit risk primarily emanates from advances and the risk can
be explained by the level of Non Performing Assets (NPA). The research question arises in this background is;
“Do the bank performance indicators directly influence the credit risk?” These are general observations which
need to be tested in order to prove whether the role of bank performance indicators as moderating variables is
statistically significant in establishing the relationship between advances and NPA of banks.
3. Theoretical Model
A common NPA model assumes NPA as a primary function of advances. As a result, banks normally use
projections of NPA based on level of advances. During periods of recessionary pressures, the bank’s tactically
control its’ advances in order to manage the accumulation of NPA. Although this approach is theoretically
acceptable, the effect of other factors that interacts and modifies the relationship between advances and the NPA
is significant as well. For instance, it may be hypothesized that higher borrowings force banks to restrict
advances to sensitive sectors and high risk projects, thus brings down the level of NPA. Higher deposits on the
other hand increase the lending and at times without assessing the project’s feasibility in-depth and may result in
higher levels of NPA. Accordingly, various bank performance indicators moderate the relationship between
advances and NPA of banks. Such moderation requires attention of policy makers so that the influence of these
variables can be used while evaluating the effectiveness of NPA management. Various bank performance
indicators affect the quality of advances; thereby the relationship can be explained in terms of various
performance indicators and their interaction on advances, as shown below;
To explain the effect of borrowings as a moderating variable;
NPAt = ( Advancet) + (Borrowingst) + (Advancet x Borrowingst) + e
(1)
To explain the effect of capital as a moderating variable;
NPAt = ( Advancet) + (Capitalt) + (Advancet x Capitalt) + e
(2)
To explain the effect of deposits as a moderating variable;
NPAt = ( Advancet) + (Depositst) + (Advancet x Depositst) + e
(3)
Accumulation of NPA depends on the advances, and interaction of advances with other variables. A pertinent
question that needs to address here is that which bank variables moderate the relationship between advances and
NPA.
The observed results suggest that the effect of bank performance indicators on the relationship between advances
and the NPA is basically moderating in nature, while the effect of macroeconomic variables on the relationship
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ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.17, 2013
www.iiste.org
between advances and the NPA is mediating in nature.
4. Empirical NPA Model
The above relationship can be better explained using linear regression with multiple predicators, as shown
below;
(4)
NPAt = b0 + (b1× Advancet) + (b2× X2 t) + (b3× (Advances t× X2t) + e
Where ;
b0, b1, b2 and b3 are the coefficients
X2 is an independent variable, and
(Advances t× X2t) is the interaction effect of independent variable on advances
Normally, researches that utilized moderation or interaction effect have noticed the issue of multicollinearity.
Multicollinearity is a matter of degree, not a matter of presence or absence. If higher the degree of
multicollinearity the greater will be the likelihood of the disturbing consequences of multicollinearity. A major
problem identified with the model with interaction effect is that the product term which is the interaction is
highly correlated with other independent variables. In order to address this problem, two approaches are
available namely centered approach, and standardized approach.
In multiple regression, variable centering is often touted as a potential solution to reduce numerical instability
associated with multicollinearity (Afshartous and Preston, 2011xvi). The use of mean centered variable reduces
the problem of multicollinearity, based on the fact that correlation between the product term of the deviations
from the mean-transformed variables with these deviations from the mean themselves is decreased by a large
magnitude (Cronbach, 1987xvii)
Using centered value approach, the regression equation is rewritten into;
NPAt = b0 + (b1× Advancet) + (b2× X2 t) + (b3× (Advancest - Α ) × (X2t - X ) + e
In this study, standardised approach is used in order to reduce the problem of multi collinearity. Kim (1993xviii)
explained that the problem of multicollinearity can be removed or reduced substantially by standardizing the
linear, quadratic, and cubic terms in the regression equation, while the correlation coefficients with other
variables are not affected by this transformation.
5. Research Methodology
The relationship between gross advances and the NPA is more complex than a simple bivariate relationship
between a predictor and criterion. It is because of the fact that the relationship is influenced by other economic
and bank specific variables. The effect of these variables may be mediated or moderating in nature. Studies (Siraj
and Pillai, 2012) identified that the influence of macroeconomic variables on the relationship between advances
and NPA are mediating in nature. The effect of bank performance indicators on the other hand is moderating in
nature. In theoretical terms, a variable can be considered as a moderating variable if it affects the strength and/or
direction of the relationship between a predictor and an outcome. In general terms, a moderator is a qualitative or
quantitative variable that affects the direction and/or strength of the relation between an independent or predictor
variable and a dependent or criterion variable (Baron and Kenny, 1986xix).
In the present study, an attempt is made to establish the effect of bank performance indicators on the relationship
between advances and NPA. The bank performance indicators selected here include Borrowing, Investments,
Reserves and Surplus, Deposits, Capital and Total Assets. Multiple regression equation, which is explained in
the theoretical model is utilized. A preliminary regression equation considering advance and the NPA is done,
which is further compared with another regression equation using bank performance indicator as an independent
variable. Both Gross NPA and Additions to NPA are included in the NPA.
The data required for the study is collected from Indian Public Sector Banks during the periods 2000-01to 201112. The Public Sector Banks are composed of the State Bank of India (SBI), Associate Banks of State Bank of
India, and Nationalized Banks.
6. Data Analysis
6.1. The Moderating Relationship of Bank Performance variables on relationship between Advances and
GNPA
6.1.1. Relationship between Bank Performance Indicators and GNPA
From the Table No. 1, a positive relationship is perceived between gross NPA and advances. The adjusted R2
shows that 48 percent of variability in the dependent variable, i.e., the gross NPA can be explained by the change
in advances in the case of SBI and its Associates, whereas the same is 35.3 per cent and 39.6 per cent with
respect to Nationalized Banks and PSB respectively. From the analysis, it is evident that the established
relationship is statistically significant (p value < 0.05).
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Vol.4, No.17, 2013
www.iiste.org
Table No. 1
Relationship between Advances and GNPA (2000-01 to 2011-12)
SBI & Associates
Nationalized Banks
Public Sector Banks
XADV
0.730*
0.008**
0.671**
Constant
1.280E-16
26827.467
-1.962E-16
Adjusted R2
0.486
0.353
0.396
F Statistics
11.389*
5.461**
8.198**
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicate the coefficient denote significant at 5 per cent level.
Source: Data Analysis
In order to assess whether the bank performance indicators moderate the above explained relationship, regression
analysis is further undertaken considering the bank performance indicator and its interaction with advances as
separate independent variables.
6.1.2. SBI and Associate Banks
From Table No. 2, it is observed that the relationship between advances and NPA turn out to be significantly
positive when bank performance indicators are included in the equation as a moderating variable. The adjusted
R2 increased to more than 90 per cent and indicate that more than 90 percent of the variability in gross NPA of
SBI and Associate Banks can be explained by the changes in selected independent variables. The effect of
moderation is statistically significant, at the same time when the moderation effect is included, the effect of
advances is not found to be statistically significant except when moderated by capital.
Table No.2
Linear Multiple Regression Coefficients, XGNPA as Dependent Variable
And XADV, XIND and XINT as Dependent Variables
Independent
Borrowing
Investments Reserves and
Deposits
Capital
Total
Variables
Surplus
Assets
XADV
1.011
0.123
0.328
0.609
1.188*
0.873
XIND
-0.824
0.140
-0.060
-0.376
-0.662
-0.638
XINT
0.970*
0.918*
0.890*
0.914*
3.058
0.923*
Constant
-0.885*
-0.783*
-0.811*
-0.835*
-0.863
-0.844*
Adjusted R2
0.973
0.923
0.993
0.982
0.936
0.979
F Statistics
131.42*
44.97*
512.58*
200.27*
54.99*
174.77*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
Source: Data Analysis
6.1.3. Nationalized Banks
From Table No. 3, it is evident that the selected bank performance indicators moderate the relationship between
advances and gross NPA of Nationalized Banks as well. In all cases, except when the capital is considered as
moderating variable, the adjusted R2 shows that more than 90 percent of the variability in the gross NPA can be
explained by the selected bank performance indicators. The regression model using the moderating effect as an
independent variable is statistically significant (F value is significant at 0.05 level). Similar to observed results of
SBI and Associate Banks, the influence of advances becomes statistically insignificant while the moderation
effect becomes statistically significant.
Table No.3
Linear Multiple Regression Coefficients, XGNPA as Dependent Variable
And XADV, XIND and XINT as Dependent Variables
Independent
Borrowing
Investments
Reserves and
Deposits
Capital
Total
Variables
Surplus
Assets
XADV
-0.486
-1.356**
-0.979
-1.216
0.103
-3.185
XIND
-0.400
1.296**
0.925
1.108
0.473
3.086
XINT
0.927*
0.906*
0.899*
0.977*
0.273
0.972*
Constant
-0.840*
-0.823*
-0.823*
-0.895*
-0.129
-0.891*
Adjusted R2
0.947
0.960
0.948
0.945
0.599
0.951
F Statistics
66.509*
88.609*
67.975*
64.119*
6.479**
71.955*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
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Source: Data Analysis
6.1.4. Public Sector Banks
As Public Sector Bank is composed of both SBI and Associates and Nationalized Banks, the result observed
above is also valid for PSB. Only 39.6 percent of the variability in the NPA is explained by change in advance.
Upon including moderating variables in the equation, the adjusted R2 becomes significantly positive, i.e., > 90
per cent. From Table No. 4 on an analysis using F-test and its significance, it is observed that the regression
equation is highly reliable in explaining NPA of Public Sector Banks. A notable remark from the analysis is the
statistical significance of moderation effect, observed from the result of t-test.
Table No.4
Linear Multiple Regression Coefficients, XGNPA as Dependent Variable
And XADV, XIND and XINT as Dependent Variables
Independent
Borrowing
Investments
Reserves
Deposits
Capital
Total
Variables
and
Assets
Surplus
XADV
0.028
-0.553
1.024
-0.261
0.227
-0.329
XIND
0.018
0.627**
1.117**
0.312
0.437
0.386
XINT
0.919*
0.898*
0.881*
0.930*
0.247
0.930*
Constant
-0.837*
-0.809*
-0.806*
-0.852*
-0.118
-0.852*
Adjusted R2
0.971
0.971
0.990
0.973
0.667
0.972
F Statistics
122.449*
121.941*
365.786*
133.590*
8.348*
126.099*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
Source: Data Analysis
6.2. The Moderating Relationship of Bank Performance indicators on relationship between Advances and
additions to NPA
6.2. 1. Relationship between Bank Performance Indicators and incidence of fresh NPA
It is observed from Table No. 5 that there exists a significant positive correlation between advances and
additions to NPA. The regression model is statistically significant as observed from the F-test and its
significance. Further, advance is a statistically significant predictor in explaining the behavior of fresh NPA,
observed from the result of t-test.
Table No. 5
Relationship between Advances and Additions to NPA
SBI & Associates
Nationalized Banks
Public Sector Banks
XADV
0.907*
0.017*
0.019*
Constant
-2.022E-17
1173.389
581.182
Adjusted R2
0.805
0.844
0.839
F Statistics
46.405*
60.334*
58.502*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
Source: Data Analysis
In an attempt to evaluate whether bank performance indicators moderate the relationship between advances and
fresh NPA, regression analysis is undertaken considering fresh NPA as a dependent variable and bank
performance indicators including advance as independent variables. The analysis is undertaken with reference to
SBI and Associates, Nationalized Banks and Public Sector Banks.
6.2.2. SBI and Associate Banks
From the result of data analysis presented in Table No. 6, few major inferences are drawn regarding SBI and
Associate Banks. The first and foremost inference is based on adjusted R2 which highlight presence of
significant positive correlation (> 90 per cent) between additions to NPA and selected bank performance
indicators. The regression model is statistically significant, observed from F statistics and its significance.
Borrowing is found to influence additions to NPA significantly compared to other performance indicators. In all
the equations formed, the moderating effect is statistically significant.
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ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.17, 2013
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Table No.6
Linear Multiple Regression Coefficients, XANPA as Dependent Variable
And XADV, XIND and XINT as Dependent Variables
Independent
Borrowing
Investments
Reserves
Deposits
Capital
Total
Variables
and
Assets
Surplus
XADV
1.419*
0.510**
0.673
0.633
1.185*
0.786
XIND
-0.852*
0.138
-0.041
-0.021
-0.395*
-0.175
XINT
0.605*
0.517*
0.529*
0.545*
1.881*
0.553*
Constant
-0.552*
-0.441*
-0.482*
-0.498*
-0.531*
-0.506*
Adjusted R2
0.987
0.937
0.981
0.981
0.972
0.980
F Statistics
275.327*
55.781*
187.087*
191.846*
128.620*
181.042*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
Source: Data Analysis
6.2.3. Nationalized Banks
The relationship between advances and fresh NPA strengthened when selected bank performance indicators were
included in the regression equation along with its moderation effect on advances. The adjusted R2 shows that
there exists a significant positive correlation between additions to NPA and selected bank performance
indicators. From Table No.7, it is further evident that the regression equation formed is statically significant in
explaining the behavior of additions to NPA. The moderation of bank performance indicators is statistically
significant based on t-statistics, except when borrowings, and reserves and surplus are used as independent
variables. Hence, it is concluded that bank performance indicators are a significant predictor variable and
moderate the relationship between advances and additions to NPA of Nationalized Banks.
Table No. 7
Linear Multiple Regression Coefficients, XANPA as Dependent Variable
And XADV, XIND and XINT as Dependent Variables
Independent
Borrowing
Investments
Reserves
Deposits
Capital
Total
Variables
and
Assets
Surplus
XADV
0.568
0.232
0.158
0.729
0.727*
0.396
XIND
0.047
0.389
0.475
-0.124
0.155
0.216
XINT
0.422
0.419*
0.407*
0.445*
0.131
0.439*
Constant
-0.383*
-0.381*
-0.373
-0.408*
-0.062
-0.402*
Adjusted R2
0.973
0.976
0.977
0.973
0.876
0.973
F Statistics
133.413*
151.669*
158.289*
133.317*
26.928*
132.770*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
Source: Data Analysis
6.2.4. Public Sector Banks
The analysis further strengthens the observation and enable the researchers to conclude that bank performance
indicators and its moderating effect is significantly influence fresh addition to NPA every year. Based on Table
No. 8, the following inferences are drawn.
• The adjusted R2 shows that more than 90 percent of variability in additions to NPA can be explained by
the selected independent variables except capital.
• Based on the result of F-statistic, it is inferred that the regression equation is statistically significant.
• The t-test result shows that the interaction effect is statistically significant in explaining the behavior of
additions to NPA.
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Table No.8
Linear Multiple Regression Coefficients, XANPA as Dependent Variable
And XADV, XIND and XINT as Dependent Variables
Independent
Borrowing
Investments
Reserves
Deposits
Capital
Total
Variables
and
Assets
Surplus
XADV
0.807**
0.351
-0.451
0.882
0.698*
0.984
XIND
-0.205
0.271
1.083*
-0.276
0.174
-0.370
XINT
0.472*
0.454*
0.446*
0.475*
0.154
0.470*
Constant
-0.430*
-0.409*
-0.408*
-0.435*
-0.074
-0.431*
Adjusted R2
0.985
0.983
0.996
0.985
0.896
0.984
F Statistics
243.735*
209.133*
1004.21*
237.452*
32.687*
229.998*
Note: A single (*) asterisk indicates the coefficients denote significant at 1 per cent level. A double asterisk
indicates the coefficient denote significant at 5 per cent level.
Source: Data Analysis
7. Major Findings and Conclusion
The findings of the regression analysis are in line with observed facts and expectations. The relationship between
advances and the NPA is strengthened when bank performance indicators moderate the relationship. The
moderating effect is more visible and statistically significant in the regression model and its significance testing.
Another major inference from the study is that advance influences additions to NPA significantly than gross
NPA of banks. This highlights the need for improvement in current policy where the relationship between
advances and the NPA is used as criteria to evaluate the efficiency of credit risk management. The results
confirm that bank performance indicators significantly influence NPA of Public Sector Banks. Since Public
Sector Banks occupy approximately 80 per cent of total advances and deposits in Indian Scheduled Commercial
Banks, the result can be generalized to the Indian banking sector. This result suggests that banks can tactically
utilize its performance indicators in managing NPA. Conversely, banks can predict the level of NPA using these
performance indicators. The main findings of the present study have both practical applicability and policy
implications. The regulatory authority of Indian scheduled commercial banks shall utilize the linkages of bank
performance indicators as moderating variables on the relationship between Advances and in developing
appropriate strategies to manage credit risk.
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