Non-Performing Loans in Bangladesh: Bank Specific and Macroeconomic Effects (original) (raw)

2020, Journal of Business Administration

This study aims to analyze the bank-specific and macroeconomic determinants of non-performing loans (NPLs) of private commercial banks (PCB) in Bangladesh. It considers panel data from 2014 to 2018 of selected 33 listed PCBs and annual macroeconomic data from 2000 to 2018. This study finds equity to total assets, interest income, lending capacity, and return on equity of bank-specific and unemployment and consumer price index of macroeconomic determinants as significant determinants of NPLs in Bangladesh. The impulse response functions (IRF) indicate that the reactions of NPLs are positive toward the shocks on return on equity, return on assets, lending capacity, asset management and operating efficiency of banks. Wald statistics indicate bank-specific and macroeconomic variables can jointly influence the NPLs. It is expected that, the research-based recommendations will benefit bankers and regulatory authority to formulate appropriate policies to reduce the portion of NPLs in Bangladesh.