What drives credit risk in the Indian banking industry? An empirical investigation

Gulati, Rachita; Goswami, Anju; Kumar, Sunil

doi:10.1016/j.ecosys.2018.08.004

Cited by 62 publications

(49 citation statements)

References 28 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Bank profitability shows significant positive relation with credit risk. This means that the ambitious pursuit of profitability may lead to high credit risk and this is contradictory to earlier studies [5,39]. The positive relation of bank profitability with credit is not surprising because of presence of board chair being ex-CEOs.…”

Section: Resultscontrasting

confidence: 67%

“…Mixed findings exist in the relationship between credit risk and bank profitability. Studying the drivers of credit risk in the Indian banking industry, the authors find negative relation between ROA and credit risk [5]. The authors explain that banks engage in more prudent lending practices with improved borrower monitoring mechanisms to minimize the level of credit risk.…”

Section: Control Variablesmentioning

confidence: 93%

“…Bank credit risk management strategies should therefore be comprehensive to address issues of default and prevent increasing non-performing loans. Most literature on credit risk uses ratios such as non-performing loans to total loans, provision for loan losses and loan loss reserves [5,6,26] to measure credit risk.…”

Section: Credit Riskmentioning

confidence: 99%

“…In a briefing to the European Parliament, the authors lament the rate of non-performing loans leading to credit risk among EU countries during and after the global financial crisis [4]. Prior research identifies factors such as low profitability, bank size and high concentration of banks in lending as key determinants of credit risk in the banking industry [5]. This study explores qualitative self-regulation approach using the BCBS internal control framework to investigate how internal controls affect credit risk in European banking.…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Akwaa-Sekyi¹

2020

Banking and Finance

View full text Add to dashboard Cite

Poor corporate governance practices have been cited as contributory to the 2007 global financial crisis. The chapter explores a qualitative self-regulation approach to address a major risk facing banks using the Basel Committee on Banking Supervision (BCBS) framework of internal controls. The study examines the effect of the qualitative principles of the BCBS internal control framework on credit risk. Corporate institutions use internal control frameworks to address the most operational risks, but the current study hypothesizes a possible relation with the credit risk. This research covers banks from selected EU countries covering some period before and after the 2007 financial crisis using a fixed-effect model. We report a significant relationship between board functions and activities, board structure and board monitoring, and credit risk. The results indicate that investment in high-risk assets, bank profitability and board chair being ex-CEO increases credit risk in European banking. The chapter extends the scope of a previous work that used the elements of the COSO internal control framework on a single country. This quantitative measure of qualitative constructs of the framework complements existing research that uses algorithms and simulations to study credit risk.

show abstract

Section: Resultscontrasting

confidence: 67%

Section: Control Variablesmentioning

confidence: 93%

Section: Credit Riskmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Akwaa-Sekyi¹

2020

Banking and Finance

View full text Add to dashboard Cite

show abstract

“…Using the GMM method with data from 147 banks in France and 133 banks in Germany from 2005 to 2011 Chaibi and Ftiti (2015) shows that economic growth variables have a significant negative effect, inflation variables have a significant negative effect, and interest rates have a significant effect positive on credit risk. Moreover, research conducted by Gulati, Goswami & Kumar (2018) using the GMM method with data from commercial banks operating in the 1998/99 to 2013/14 period showed that economic growth variables and inflation variables had a positive relationship with credit risk but were not significant. Louzis, Vouldis & Metaxas (2012) using the GMM method with data from the 9 largest banks in Greece in the first quarter of 2003 to the third quarter of 2009 showed that economic growth variables had a significant negative effect, and interest rate variables had a significant positive effect on credit risk.…”

Section: Literature Reviewmentioning

confidence: 99%

The impact of macroeconomic variables on credit risk: Evidence from Indonesian business sector level data

Mubin

Sugara

2020

IJRBS

View full text Add to dashboard Cite

This study aims to empirically examine the effect of macroeconomic variables on credit risk in each business sector in Indonesia. Using time-series quarterly data during the period 2011q1-2019q2, this study utilized the Autoregressive Distributed Lag (ARDL) model. The results of this study explain that macroeconomic variables namely GDP growth in the long run have a significant negative effect on credit risk in 6 sectors and in the short term have a significant negative effect on 6 sectors. Inflation has a significant positive effect in the long run on one sector, namely the provision of accommodation and provision of food and drink, and a significant negative effect on 6 sectors, in the short term inflation has a significant positive effect on 7 sectors and a significant negative effect on one sector, namely education services. The last variable is the long-term loan interest rate which has a positive effect on 7 sectors and in the short term has a significant positive effect on 6 sectors on the high value of credit risk in each business sector in Indonesia. The result indicating that macroeconomic variables have a real impact on credit risk.

show abstract

The effect of non‐performing loans on credit expansion: Do capital and profitability matter? Evidence from European banks

Thornton

Tommaso

2020

Int. J Fin Econ

View full text Add to dashboard Cite

We examine whether the effect of NPLs on bank credit growth differs depending upon the level of bank capital and profitability in a panel of up to 521 banks from 28 European countries. Our main finding is that there is a significant positive interaction effect of NPLs and bank capital and NPLs and profitability on the supply of bank credit. Thus, whether NPLs impede the monetary policy transmission mechanism depends substantially on whether or not banks are sufficiently capitalized and profitable. Policy actions aimed at reducing NPLs to sustain bank credit should protect bank capital and profitability if they are to be effective, including by supporting efforts that aim at returning NPLs to good standing.

show abstract

What drives credit risk in the Indian banking industry? An empirical investigation

Cited by 62 publications

References 28 publications

Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

Internal Controls and Credit Risk in European Banking: The Basel Committee on Banking Supervision Framework Approach

The impact of macroeconomic variables on credit risk: Evidence from Indonesian business sector level data

The effect of non‐performing loans on credit expansion: Do capital and profitability matter? Evidence from European banks

Contact Info

Product

Resources

About