Explaining Non-Performing Loans of Commercial Banks in Malaysia
DOI:
https://doi.org/10.14738/assrj.106.2.15014Keywords:
Non- performing loan, Capital adequacy, Liquidity, Fixed effect modelAbstract
This study examines the influence of bank size, capital adequacy, profitability and liquidity on non-performing loans (NPLs). The growing risk of non-performing loans leading to banks’ potential losses motivates this study to be conducted. This study includes commercial banks in the Main Market of Bursa Malaysia from 2010 to 2021. To test the hypotheses, this study employs a Fixed Effect model. The results show that bank size and capital adequacy have a significant and negative relationship with non-performing loans, indicating that banks with larger and higher capital adequacy have lower NPLs. Generally, this study found a limited number of commercial banks listed in the Malaysian market, providing a smaller sample. Nonetheless, the results of this study may benefit commercial banks in the significant factors to prevent the occurrence of non-performing loans.
References
Asteriou, D., and Hall, S. G., Applied Econometrics (Second Edition): PALGRAVE MACMILLAN, 2011.
Barus, A. C. and Erick, Analysis of Factors that influence Non-Performing Loans at General Banks in, Journal Wira Ekonomi Mikroskil, 2016. 6(2): p. 113–122.
Chavan, P. and Gambacorta, L., Bank lending and loan quality: the case of India. BIS Working Paper, 2016: p. 1–33.
Demirguc-Kunt, A., and Huizinga, H., Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence. World Economic Review, 1999. 13(2): p. 379-408.
Dimitrios, A. et al., Determinants of non-performing loans: Evidence from Euro-area countries. as18(C): p. 116-119.
Ebenezer, O. O. et al., Loan growth, bank solvency and firm value: A comparative study of Nigerian and Malaysian commercial banks. Journal of Reviews on Global Economics, 2019. 8: p. 373–386.
Ghosh A. Banking-industry specific and regional economic determinants of non-performing loans: Evidence from US states. Journal of Financial Stability, 2015. 1(20): p. 93-104.
Jolevski, L., Non-performing loans and profitability indicators: The case of the Republic of Macedenia. Journal of Contemporary Economic and Business Issues, 2017. 4(2), pp. 5-20. 105
Louzis, D., et al., Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios. Journal Of Banking & Finance, 2012. 36(4): p. 1012-1027.
Hausman, J. A., Specification tests in econometrics. Econometrica, 1978. 46(6): p. 1251–1271.
Hakenes, H. and Schnabel, I., Bank size and risk-taking under Basel II. Journal of Banking and Finance, 2011. 35(6): p. 1436–1449.
Huljak, I. et al., Do non-performing loans matter for bank lending and the business cycle in euro area countries?. Journal of Applied Economics, 2022. 25(1): p. 1050–1080.
Jabbouri, I. and Naili, M., Determinants of Nonperforming Loans in Emerging Markets: Evidence from the MENA Region. Review of Pacific Basin Financial Markets and Policies, 2019. 1950026.
Khaled, A. M., Does Excess Bank Liquidity Impact Non-Performing Loan? A Study on Bangladeshi Economy, Munich Personal rePec Archive, 2019. 101150.
Khan, M. A., et al., Determinants of non-performing loans in the banking sector in developing state, Asian Journal of Accounting Research, 2020. 5(1): p. 135–145.
Kuzucu, N and Kuzucu, S., What Drives Non-Performing Loans? Evidence from Emerging and Advanced Economies during Pre- and Post-Global Financial Crisis. Emerging Markets Finance and Trade, 2018. 55(2): p. 1-15.
Mahyoub, M., Said, R. M., Factors Influencing Non-Performing Loans: Empirical Evidence From Commercial Banks In Malaysia. Research Journal of Business and Management, 2021. 8(3): p. 160-166.
Martiningtiyas, C. R. and Nitinegeri, D. T., The Effect of Non-Performing Loans on Profitability in Banking Sector in Indonesia. International Conference on Management, Accounting, and Economy (ICMAE 2020), 2020.
Murthy, U. et al., Factors Influencing Non-Performing Loans in Commercial Banks: The Case of Banks in Selangor. International Journal of Business and Management, 2017. 12(2): p. 246.
Oni, O. O., Determinants of Non-performing Loans of Deposit Money Banks in Sub-Saharan Africa. ProQuest Dissertations Publishing, 2019. 27545541.
Ramli, N. A. et al., Investigating the effect of non-performing loans on technical efficiency in Malaysian banking sector. AIP Conference Proceedings, 2018.
Singh, P. and Singh, K., Analysis on Malaysian Non-Performing Loans and Financing Sale, Effects of Covid-19 and its Legal and Regulatory Framework. International Journal of Advanced Research in Economics and Finance, 2022. 4(2): p. 1– 11.
Wood, A. and Skinner, N., Determinants of non-performing loans: evidence from commercial banks in Barbados. The Business and Management Review, 2018. 9(3): p. 44–64.
Yulianti, E., et al., The Effect of Capital Adequacy and Bank Size on Non-Performing Loans in Indonesian Public Banks. Journal of Accounting Research, Organization and Economics, 2018. 1(2): p. 205–214.
Zain, E. N. M., Determinants of Non-Performing Loans: Evidence from Conventional Banks in Malaysia. Humanities & Social Sciences Reviews, 2020. 8(2): p. 423-430.
Zainol, J. M. et al., Macroeconomics Determinants of Non-Performing Loans in Malaysia: An ARDL Approach. International Journal of Academic Research in Business and Social Sciences, 2018. 8(10): p. 692-706. 106
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Leedya Sivalaxmi Sivarajan, Siti Sarah Alyasa-Gan, Norliza Che-Yahya, Sharullizuannizam Salehuddin
This work is licensed under a Creative Commons Attribution 4.0 International License.
