Non-Performing Loans, Macroeconomic and Bank-Specific Variables in Southeast Asia During Covid-19 Pandemic

Abstract

This study examines the relationship between bank-specific variables, macroeconomic variables and non-performing loans (NPLs) in the seven countries of Southeast Asia (Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) during the pre-COVID-19[Formula: see text]and COVID-19 pandemic. This study adopts panel data regression and distributed lagged regression to examine the impact of bank-specific variables and macroeconomic variables as NPL determinants. The results show that bank-specific variables significantly correlate to NPL, but limited evidence indicates the influence of macroeconomic variables during pre-COVID. Nonetheless, macroeconomic variables are significant to NPL with the emergence of the pandemic, while the bank-specific variables are found to be insignificant. It shows that macroeconomic variables have a greater impact during the turbulent period as they affect most businesses, especially during the pandemic. Furthermore, macroeconomic variables are observed to have a stronger influence on developed countries, but the impact of bank-specific variables is stronger in emerging countries. The results of this study assist policymakers, regulators, banks and governments in identifying the determinants of high NPL as the indicator of a financial crisis. Greater emphasis shall be given to the changes in macroeconomic variables.

The Road to Sustainable Investing: Corporate Governance, Sustainable Development Goals, and the Financial Market

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Determinants of Non-Performing Loans in a Small Island Economy of Fiji: Accounting for COVID-19, Bank-Type, and Globalisation

“…However, one of the most significant challenges that financial institutions face is the rise in non-performing loans (NPLs). High NPLs can have adverse effects on both the banking system and the overall economy, as noted by recent studies (Loang et al 2023). The level of NPLs can serve as an indicator of both a bank's low credit quality and the effectiveness of its risk management in handling its loan portfolio within the banking sector (Cortavarria-Checkley et al 2000).…”

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