TAILIEUCHUNG - Factors affecting bank credit risk: An empirical insight

Credit risk impedes the growth of bank’s performance and position which is largely influenced by a number of factors that should be taken consideration and minimized. The objective of the study is to illustrate the inclusion of valid causes of selecting best model with regard to statistical significance. The study conducted on panel data consisting of 322 observations with 22 commercial banks and 15 consecutive years. The study finds that profitability, capital and bank size are inversely associated with bank credit risk whereas net interest margin and inefficiency have positive effect. Moreover consecutive addition of each variable is in charge of constructing the accurate model considering the variation and goodness of fit value in the respective model. However, no evidence is found in support of macroeconomic variables used in the model. Last not the least, the sensitivity of the model test argued in favor of baseline model which established the cause and effect relationship in a logical manner. | Journal of Applied Finance Banking vol. 8 no. 2 2018 45-67 ISSN 1792-6580 print version 1792-6599 online Scienpress Ltd 2018 Factors affecting bank credit risk An empirical insight Changjun Zheng 1 Niluthpaul Sarker 1 and Shamsun Nahar2 Abstract Credit risk impedes the growth of bank s performance and position which is largely influenced by a number of factors that should be taken consideration and minimized. The objective of the study is to illustrate the inclusion of valid causes of selecting best model with regard to statistical significance. The study conducted on panel data consisting of 322 observations with 22 commercial banks and 15 consecutive years. The study finds that profitability capital and bank size are inversely associated with bank credit risk whereas net interest margin and inefficiency have positive effect. Moreover consecutive addition of each variable is in charge of constructing the accurate model considering the variation and goodness of fit value in the respective model. However no evidence is found in support of macroeconomic variables used in the model. Last not the least the sensitivity of the model test argued in favor of baseline model which established the cause and effect relationship in a logical manner. JEL classification numbers C23 Keywords Quantitative research Panel data Credit Risk Bank Bangladesh. 1 Introduction The banking business is tremendously affected by the observed and unobserved factors in a stiff competitive environment. In every respect of its operation banks 1 School of Management Huazhong University of Science and Technology . 2 School of Accounting Finance Zhongnan University of Economics and Law . China. Article Info Received November 5 2017. Revised November 28 2017 Published online March 1 2018 46 Changjun Zheng et al. should take effective measures to reduce risk by identifying the probable causes based on practical scenarios. The profitability of banks and capital regulation has an important .

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