Macroeconomic and Bank-Specific Determinants of Non-Performing Loans: Evidence from countries in Asia
Post by MSF Chula at Friday, 8 January 2021 10:32 PM

This paper objective is to examine the determinants of non-performing loans in terms of macroeconomic and microeconomic (bank-specific) conditions from 172 banking institutions from selected Asian countries covering the period of 2000 to 2019. The variables including 7 bank-specific and 5 macroeconomic variables are explored by fixed effect estimation and difference GMM estimation for static model and dynamic model, respectively. The study also further examines difference of impact from remittance between commercial banks and Specialized financial institutions in Thailand. Also, the countries are divided into Islam and non-Islam countries to investigate the belief of people as different level of seriousness of debts. The result showed that NPL largely depends on bank-specific determinants. The findings show that non-performing loans in the recent year have significant positive relationship with the one-year lagged of itself, the loan to asset, bank size and Interest spread and a negative relationship with the Return on Asset and the capital adequacy ratio. Loan to asset was associated to NPL positively in Thailand and negatively when examining samples in Asian countries. The results of the empirical study indicated strong relationship between remittance inflow and level of non-performing loan but inconclusive impact from GDP growth, inflation, export to import. In addition, there was a lower level of non-performing loans in SFIs due to effect from remittance inflow to Thailand. The debt of each country effected on NPL both positively and negatively.

Last updated at Friday, 8 January 2021 10:32 PM