Credit Risk and Commercial Bank Performance: Evidence from ASEAN

Lew, Bao-Yi; Lau, Wei-Theng

doi:10.6007/ijarems/v11-i3/14726

Cited by 3 publications

(12 citation statements)

References 11 publications

(23 reference statements)

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“…Previous research in ASEAN countries shows that LDR significantly positively affects banking profitability [15]. Other research in South Asia using banking samples from India and Pakistan indicates that LDR, described as a liquidity ratio (LR), has a significant positive effect on company performance as defined by ROA and ROE [23].…”

Section: Loan To Deposit Ratio (Ldr)mentioning

confidence: 97%

“…This study uses Return on Equity (ROE) and Return on Assets (ROA) to describe the financial performance of banks, as well as previous research conducted by [15], which states that ROA represents the level of net income of a bank and determines how banks use their assets to generate profits. ROE is generally used to determine the effectiveness of banks in generating profits from shareholders' equity.…”

Section: B Hypothesis Development Financial Performancementioning

confidence: 99%

“…Previous research in ASEAN countries shows that CAR significantly negatively affects banking profitability, as depicted by ROE. This suggests that too large capital levels can reduce the efficiency and optimization of banking performance [15]. Another study in South Asia states that CAR is included in bank credit risk and has a significant positive relationship with bank financial performance, as depicted by ROA and ROE [23].…”

Section: Capital Adequacy Ratio (Car)mentioning

confidence: 99%

“…Previous research in ASEAN countries shows that NPL significantly negatively affects bank profitability [15]. A study in South Asia states that Asia, as a region that contributes 60% to world economic growth, faces significant NPL problems.…”

Section: Non Performing Loan (Npl)mentioning

confidence: 99%

“…Investigating credit risk is an ongoing effort to encourage the continuity of banking stability in developing and developed countries [15]. While other studies categorize CAR and NPL under credit risk, LDR is included under bank-specific factors, bank size, and other financial indicators.…”

mentioning

confidence: 99%

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The Effect of Corporate Social Responsibility, Credit Risk, and Leverage on the Financial Performance of Commercial Banks in Indonesia

Mahisi

Saputra

Leon

et al. 2023

IJSMS

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This study examines the relationship between corporate social responsibility, credit risk, and leverage with the performance of commercial banks in Indonesia. Hypothesis testing is conducted to explore the influence of independent variables, namely Corporate Social Responsibility (CSR), Credit Risk described by Capital Adequation Ratio (CAR), Loan To Deposit Ratio (LDR), and Non-Performing Loan (NPL), and Leverage defined by Debt to Asset Ratio (DR), on the dependent variable, namely Financial Performance measured using ROA and ROE. In contrast, Bank Size is used as a control variable. The sample of this study includes 33 conventional commercial banks listed on the Indonesia Stock Exchange (IDX), using secondary data obtained from financial reports and bank sustainability reports for six years (2016-2021). With the multiple regression method on panel data using the Eviews 12 tool, the results of this study indicate that the CSR variable has a significant negative effect on ROE and has no significant impact on ROA, CAR has no significant effect on ROE or ROA, LDR has a significant negative impact on ROE and ROA, NPL has no significant effect on ROE or ROA, and DR has a significant positive impact on ROE but has no significant effect on ROA. This study can provide empirical evidence to managers, investors, and regulators to better understand CSR, leverage, and bank risk in formulating better policies and careful decision-making.

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Section: Loan To Deposit Ratio (Ldr)mentioning

confidence: 97%

Section: B Hypothesis Development Financial Performancementioning

confidence: 99%

Section: Capital Adequacy Ratio (Car)mentioning

confidence: 99%

Section: Non Performing Loan (Npl)mentioning

confidence: 99%

mentioning

confidence: 99%

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The Effect of Corporate Social Responsibility, Credit Risk, and Leverage on the Financial Performance of Commercial Banks in Indonesia

Mahisi

Saputra

Leon

et al. 2023

IJSMS

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Credit Risk and Profitability Position of Nepalese Private and Joint Venture Commercial Banks

Thapa,

Sejuwal

2023

The Batuk

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Credit concentrations, credit processes and other externalities have made credit risk more important over the past decade, followed by liquidity issues. This study was conducted to compare the credit risk exposure of various banks in terms of their liquidity, capital ratio, size, operational inefficiency, loan growth rate, and non-performing loans. It also investigated the spontaneous relationship between credit risk and bank profitability. Secondary data of 5 years from ten banks (5 each from joint venture and private banks) have been collected. The descriptive and comparative study designs were employed and SPSS software was used for the analysis of data. The results showed that the private banks surpass joint venture banks in terms of capital ratio and operating efficiency, but joint venture banks lead private banks in terms of liquidity, capital ratio, total assets, loan growth rate, and non-performing loans. However, the independent sample t-test did not show any significant differences on liquidity, capital ratio, size, and loan growth rate. The Pearson’s correlation showed positive associations of capital ratio (moderate and significant), operating inefficiency (weak and insignificant), and loan growth rate (weak and insignificant) with ROA. In contrast, bank size and nonperforming loans have significant moderate negative correlations, but liquidity is not found to be correlated with ROA. The empirical findings of this study are considered helpful in evaluating the comparative credit risk exposure of the banking sector and have both managerial and academic implications.

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Credit Risk Management and Financial Performance of Listed Commercial Banks in Kenya

Ikinya Okiru,

Bichanga Miroga

2024

Int J Res Rev

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Commercial banks are concerned with the provision of credit facilities in form of loans and advances to customers. These loans and advances are expected to be repaid by customers in line with the agreement reached with their bankers. Customers’ default in the repayment of loans and advances at the agreed period may lead to bad and doubtful debts and this can affect the financial health, profitability and going concern status of the bank. This study empirically explored the effect of credit risk management on the financial performance of nine listed commercial banks in Kenya for the period, 2018-2022. Credit risk management as the independent variable, was surrogated by two parameters- loans to deposit ratio and Non-performing Loans ratio. Return on Assets was used as a proxy for financial performance of the listed commercial banks in Kenya. The study utilized the information asymmetry theory and the theory of moral hazard and adverse selection. A correlational research design, using secondary data derived from listed commercial banks’ annual audited reports and information from Nairobi Securities Exchange was used in this study. The target population of the study was the nine listed commercial banks in Kenya. A pilot study was carried by performing the normality and multi-collinearity tests from the sample data collected for purposes of assessing the reliability and validity of the model. A census method was adopted in data collection since the target population was manageable. Collected data was analyzed using the Statistical Package for Social Sciences Version 28 where both descriptive and inferential statistical methods were used to describe and depict the results (Mean, Standard Deviation, Correlation, Regression and Analysis of variances). The findings of the study revealed a statistically significant regression effect and indicative of accomplished prediction of financial performance of the listed commercial banks through the F-calculated value which showed that the model was significant. Loan to deposit ratio explained .4% (r =.280) of financial performance of listed commercial banks in Kenya and non-performing loans ratio -36.5% (r=-.681) of financial performance of the listed commercial banks in Kenya. The study will be expected to add to the existing literature in the finance field and more importantly, the credit risk management in commercial banks and other related sectors. The study recommended that; management balance the ratio of financing between equity, debt and customer deposits to extend lending capacity, and generate high earnings volume; desist from holding capital without investing for improved financial achievement; management should maintain a moderate level of Loans and advances to deposit ratio since it is a measure of the banks’ ability to survive withdrawals, because higher rates lead to liquidity problems; give credit-risk management prominence in their strategic policies and finally, due to the continuous deterioration and accumulation of the nonperforming loans, management ought to strengthen loan recovery measures. Keywords: Credit Risk Management, Financial Performance, Listed Banks, Equity Multiplier Ratio, Capital Adequacy Ratio, Nonperforming Loans

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Credit Risk and Commercial Bank Performance: Evidence from ASEAN

Cited by 3 publications

References 11 publications

The Effect of Corporate Social Responsibility, Credit Risk, and Leverage on the Financial Performance of Commercial Banks in Indonesia

The Effect of Corporate Social Responsibility, Credit Risk, and Leverage on the Financial Performance of Commercial Banks in Indonesia

Credit Risk and Profitability Position of Nepalese Private and Joint Venture Commercial Banks

Credit Risk Management and Financial Performance of Listed Commercial Banks in Kenya

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