Revisiting credit risk and banks performance of China's commercial banks before and after Covid 19 pandemic

Abstract

The effectiveness of the financial market is reflected in the financial crisis which mostly results in credit risk. The impact of credit risk in China is likely to affect the global economy since China is the fastest‐growing economy as well as the second‐best economy in the world in terms of gross domestic product. Using panel data for twenty‐eight listed commercial banks in China from 1990 to 2020, the study explored the relationship between credit risk and business performance. The authors utilized the Generalized Methods of Moments (GMM) as the primary estimator while the Pooled Mean Group (PMG) was used as a robust estimator. A negative and statistically significant relationship was found between non‐performing loan and return on equity, as well as loan loss provision and profitability of the bank. On the contrary, capital adequacy ratio revealed a positive and statistically significant relationship with bank performance. Credit growth on the other hand recorded positive but insignificant relationship with performance of banks. The findings will add up to existing literature on credit risk and business performance of commercial banks.

Addressing environment, social and governance (ESG) investment in China: Does board composition and financing decision matter?

“…The GMM estimator solves the issue of autocorrelation and heteroskedasticity [ 27 ]. GMM handles hidden standard shocks to avoid endogeneity problems caused by inverse causality and biased selection [ 61 ]. The fixed effect estimator enables heterogeneity to be accounted [ 62 ].…”

Risk Assessment for Canadian Commercial Banks

“…TD has increased credit risk in 2022 compared to before thus negatively affecting the later performance and growth of the bank. As concluded by Twum et al (2022), credit risk and bank performance are negatively correlated, as credit risk increases, then performance decreases [15]. Based on this, if EAD continues to rise, it will reduce the bank's profitability as well as increase the non-performing loans.…”

The Moderating Role of Technological Innovation on Environment, Social, and Governance (ESG) Performance and Firm Value: Evidence from Developing and Least-Developed Countries

“…Based on the preliminary tests, the GMM and PMG estimators were employed. The GMM estimator is resistant to distributional assumptions, and it may be used to correct the endogeneity bias and serial correlation of the study variables [44]. Additionally, when there is endogeneity in the model, the PMG estimator can still provide reliable and unbiased findings, thus improving the effectiveness and dependability of our findings.…”