Impact of Macroeconomic and Endogenous Factors on Non Performing Bank Assets

• Main Author: Swamy, Vighneswara
• Format: Article
• Language: English
• Published: Universiti Utara Malaysia 2012
• Subjects: HG Finance
• Online Access: http://repo.uum.edu.my/25026/1/IJBF%209%201%20%202012%2027%2047.pdf; http://repo.uum.edu.my/25026/; http://ijbf.uum.edu.my/index.php/previous-issues/145-the-international-journal-of-banking-and-finance-ijbf-vol-9-no-1-march-2012

Determinants of default risk of banks in emerging economies have so far received inadequate attention in the literature. Using panel data techniques, this paper seeks to examine the impact of macroeconomic and endogenous factors on non-performing assets during 1997-2009. The findings reveal some interesting inferences contrary to the perception of few opinion makers. Lending rates have been found to be not so significant in affecting the non-performing loans, which is contrary to the general perception. Such assets have a negative and significant influence, indicating that large banks may have better risk management procedures and technology which definitely allows them to finish up with lower levels of non-performing assets compared to smaller banks. Further, this study suggests that private banks and foreign banks have advantages in terms of their efficiencies in better credit management that contains non-performing assets. That indicates that bank privatization can lead to better management of default risk.