Industry-Specific and Macroeconomic Determinants of Non-Performing Loans: A Comparative Analysis of ARDL and VECM

Zheng, Chao; Bhowmik, Probir Kumar; Sarker, Niluthpaul

doi:10.3390/su12010325

Cited by 39 publications

(42 citation statements)

References 42 publications

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“…These results are supported by a time series analysis done on Bangladesh from 1979 to 2018. Researchers found liquidity is positively related to bank risk, while profit is negatively associated with statistical significance ( Zheng et al., 2020 ).…”

Section: Regression Results and Discussionmentioning

confidence: 99%

Loan growth and bank risk: empirical evidence from SAARC countries

Bhowmik

Sarker

2021

Heliyon

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During the last few decades, the world financial crisis sheds on the bank risk, which creates a direct threat to the existence of banks. This paper investigates the relationship between bank risk and loan growth in the South Asian economies. The study has collected data from BankFocus of 118 commercial banks from 2011 to 2019. This study explores three hypotheses explaining the relation between (i) Bank Risk and Loan Growth; (ii) Loan growth and Bank Profitability; and (iii) Loan growth and bank solvency. Results show that loan growth can induce bank risk in the South Asian economic region. At the same time, Banks' solvency and profitability are correlated to bank risk with statistical significance. Primarily OLS has been applied, followed by GMM estimation. Non-Performing Loan (NPL) has been used as the proxy of bank risk. Further, to check the robustness of the investigation, we have used ZSCORE as a replacement to NPL. The results derived from regressions can put light on banks' poor performance in the South Asian counties and, simultaneously, may set guidance for policymakers of emerging economies.

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Section: Regression Results and Discussionmentioning

confidence: 99%

Loan growth and bank risk: empirical evidence from SAARC countries

Bhowmik

Sarker

2021

Heliyon

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“…In addition, bank-specific variables such as profitability, business, and household loan growth have a negative effect, while bank solvency positively affects the NPLs. Focusing on the banking system of Bangladesh, Zheng et al (2020) document the strong relationship between macroeconomic environment and credit risk. By an ARDL and VECM cointegration model, the authors find a negative impact of GDP and unemployment rate on NPLs dynamics.…”

Section: Literature Overviewmentioning

confidence: 99%

“…First, to our knowledge, it is the first work that studies the impact of the macroeconomic environment in Italy during the recent period. Several papers have analyzed this relationship in the U.S. (Ghosh 2015), European (Makri et al 2014;Rinaldi and Sanchis-Arellano 2006), Greek (Anastasiou et al 2019;Konstantakis et al 2016;Louzis et al 2012), France and Germany (Chaibi and Ftiti 2015), India (Gaur and Mohapatra 2020;Mishra et al 2021), and other world regions (Beck et al 2015;Espinoza and Prasad 2010;Hada et al 2020;Kjosevski et al 2019;Nkusu 2011;Tanasković and Jandrić 2015;Zheng et al 2020;Žunić et al 2021) contexts. However, only Bofondi and Ropele (2011) studied the relationship between macroeconomic variables and bad loans in the Italian context from 1990 to 2010.…”

Section: Introductionmentioning

confidence: 99%

Non-Performing Loans and Macroeconomics Factors: The Italian Case

Foglia

2022

Risks

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The purpose of this work is to investigate the influence of macroeconomics determinants on non-performing loans (NPLs) in the Italian banking system over the period 2008Q3–2020Q4. We mainly contribute to the literature by being the first empirical article to study this relationship in the Italian context in the recent period, thus providing fresh evidence on the macroeconomic impact on NPLs, i.e., on the credit risk of Italian banks. By employing the Autoregressive Distributed Lag (ARDL) cointegration model, we are able to investigate the short and long-run effects of macroeconomic factors on NPLs. The empirical findings show that gross domestic product and public debt have a negative impact on NPLs. On the other hand, we find that the unemployment rate and domestic credit positively influence impaired loans. Finally, we find evidence of the “gamble for resurrection” approach, i.e., Italian banks tend to support “zombie firms”.

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“…It is a measure of insolvency which is the situation where losses are greater than equity. Nonperforming loans ratio is the ratio of nonperforming loans to total loan (Zheng et al , 2020). A nonperforming loan represents a loan for which debtor is unable to pay scheduled payments for at least 90 days.…”

Section: Methods and Mode Of Analysismentioning

confidence: 99%

Diversification, corporate governance, regulation and bank risk-taking

Hunjra

Hanif

Mehmood

et al. 2020

JFRA

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Purpose The purpose of this paper is to investigate the impact of diversification, corporate governance and capital regulations on bank risk-taking in Asian emerging economies. Design/methodology/approach The authors applied the generalized method of moments to analyze a sample of 116 listed banks of ten Asian emerging economies for the years 2010–2018. Findings The authors found that diversification, board size, CEO duality and board independence, block holders and capital regulations significantly affect bank risk-taking. In particular, nontraditional income sources such as noninterest income and adoption of diversification strategies minimize bank risk-taking. Practical implications It is expected that the outcomes of this study can be used by banks in Asian emerging economies that seek to reduce risk-taking by managing the diversification of their income streams and managing the impacts of capital regulation and implementing sound corporate governance features in monitoring their operations. This study suggests practical risk minimizing strategies for banks. First is the sourcing of nontraditional income and adoption of diversification strategies. Second, maintaining nonexecutive directors on the board would enhance monitoring of business activities. Third, maintaining deposit insurance would reduce bank’s risk. Government provides insurance to depositors to motivate them to deposit their funds into the banks. This, in return, facilitates banks to overcome risk. However, banks need to be cautious of any increase in capital ratio, as channeling funds into risky investments would increase risk. Originality/value This study is the first to investigate the impacts of corporate governance, diversification and regulation on bank’s risk-taking in a cross-country setting of ten Asian emerging economies.

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Industry-Specific and Macroeconomic Determinants of Non-Performing Loans: A Comparative Analysis of ARDL and VECM

Cited by 39 publications

References 42 publications

Loan growth and bank risk: empirical evidence from SAARC countries

Loan growth and bank risk: empirical evidence from SAARC countries

Non-Performing Loans and Macroeconomics Factors: The Italian Case

Diversification, corporate governance, regulation and bank risk-taking

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