Bank-specific Factors Affecting Non-performing Loans in Developing Countries: Case Study of Indonesia (original) (raw)
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International Journal of Research in Business and Social Science (2147- 4478)
The country's macroeconomic conditions, whether directly and indirectly will influence the development of the financial and banking sector. This study aims to determine the effect of macroeconomic and internal company variables consisting of BOPO, ROA, money supply, and the unemployment rate on non-performing loans (NPL) in Indonesian banking, especially Regional Development Banks (BPD). The sampling technique used is purposive sampling technique. There are 20 Regional Development Banks (BPD) that met the requirements determined by the observation period from 2008-2021. The data processing method used is panel data regression. Model selection uses the Chow test, Hausman test and Langgrange Multiplier test (LM Test). Based on this, the appropriate model is the Fixed Effect Model (FEM). Testing the classical assumptions of FEM shows that there is a heteroscedasticity problem, then it is recovered using the Feasible Generalized Least Square (FGLS). The results of the analysis show ...
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Non-performing loans (NPLs) are a typical sign of stress testing from financial institutions and may be used to measure the financial system's health. The critical criterion for achieving financial system stability is macroeconomic stability. Instability in the financial system (financial crisis) impairs a bank's liquidity and might lead to more problematic loans, impacting other industries. The association between NPL and numerous macroeconomic variables, including Interest Rate Spreads, Inflation, Percentage of Open Disruption, and Amount of Foreign Exchange Reserves in Indonesia, is examined in this paper. The study used the Vector Error Correction Model (VECM) method to estimate data for a sample period of 2000 to 2020. In the long run, inflation factors, the number of open jobless, and the number of foreign exchange reserves all substantially impacted the ratio of non-performing loans, according to the findings. However, no variables influenced the percentage of non-per...
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Banking is important for the stability and success of the economy. The success of the banking system on financial intermediation in developing countries is directly affected by non-performing loans (NPLs). Many factors can be treated as NPL determinants. Accordingly, the factors that explain NPLs contain very important information for banks. To this end, the study is an attempt to examine various banking factors that affect NPLs with respect to developing economies. In this study, the bank-specific and macroeconomic factors affecting the NPL rates were analysed through the dynamic panel data analysis. Analyses were made using described G20 countries between 1998 and 2017. The results indicate that the lagged value of NPLs, return on equity, credit growth and credit costs have a significant positive relationship with NPLs, while capital adequacy and GDP have a negative association with NPLs. The results confirm that if the bank-specific conditions change, the credit quality and bank ...
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A prerequisite of a sound financial system is effective channeling of financial resources to efficient users; hence maximizing economic and societal welfare. To that end, the prevalence of bad loans in banks in emerging economies is a major policy concern. In an attempt to add to the growing body of literature explaining the interrelationship between macroeconomic and firm-specific factors, and non-performing loans (NPL), this paper examines data from 24 scheduled commercial banks in Bangladesh from 2008 to 2019. Macroeconomic factors as well as firm-specific factors related to profitability, capital strength, and efficiency are considered. Panel data regression analysis is performed to estimate pooled OLS, fixed effects, and random effects models. Following the necessary testing, it was found that the fixed effects model with robust standard error is appropriate. Results show that return on assets and inflation have a negative influence on NPL, but GDP growth has a favorable impact...
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