Received: 2020-02-20  |  Accepted: 2020-03-21  |  Published: 2020-06-30

Title

A comparative study of performance of commercial banks in ASIAN developing and developed countries


Abstract

The main focus of this study is to investigate the impact of non-performing loans (NPLs) and other bank specific factors on the financial performance of commercial banks in Asian developing and developed countries due to an alarmingly high ratio of non-performing loans.The bank specific factors that are used in this study are cost efficiency ratio (CER), capital adequacy ratio (CAR), size of the bank, sales growth (SG) and proxies of financial performance (FP) are return on equity (ROA) and return on asset (ROE). Secondary Panel data of ten years (2006-2015) has been used for this empirical analysis and 19 commercial banks from developing countries of Asia (Pakistan and India), while 17 commercial banks from developed countries of Asia (Japan and Saudi Arabia) are selected. Generalized method of moment is used for the coefficient estimation to overcome the effects of some endogenous variables. NPLs and CER are significantly negatively related to the financial performance (ROA and ROE) of developing and developed countries commercial banks. There is a negative relationship of bank size with most of financial performance variables. Sale growth and capital adequacy ratio has significant positive relationship both measures of financial performance (ROA and ROE) in both pools. Due to the importance of commercial banks in the overall economy of a country, there is a need for management of commercial banks and regulatory authorities to undertake policies that ensure efficiency in banking operations.


Keywords

non-performing loans, micro economic variables, Pakistan & India, Japan & Saudi Arabia, GMM approach


JEL classifications

B21 , D00 , G21 , G15


URI

http://jssidoi.org/ird/article/39


DOI


HAL


Pages

580-591


Funding


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Siddique, Asima
COMSATS University Islamabad, Islamabad, Pakistan http://www.comsats.edu.pk
Articles by this author in: CrossRef |  Google Scholar

Masood, Omar
University of Lahore, Lahore, Pakistan https://www.uol.edu.pk
Articles by this author in: CrossRef |  Google Scholar

Javaria, Kiran
University of Lahore, Lahore, Pakistan https://www.uol.edu.pk
Articles by this author in: CrossRef |  Google Scholar

Huy, Dinh Tran Ngoc
International University of Japan, Minamiuonuma, Japan https://www.iuj.ac.jp
Articles by this author in: CrossRef |  Google Scholar

Journal title

Insights into Regional Development

Volume

2


Number

2


Issue date

June 2020


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

Article views & downloads

HTML views: 2565  |  PDF downloads: 1177

References


Adebayo, M., D. Adeyanju and S. Olabode, (2011). Liquidity Management and Commercial Banks' Profitability in Nigeria. Research Journal of Finance and Accounting, 2(8)

Search via ReFindit


Akhtar, M. F., Ali, K., & Sadaqat, S. (2011). Factors influencing the profitability of Islamic banks of Pakistan. International Research Journal of Finance and Economics, 66, 125-132.

Search via ReFindit


Alshatti, A. S. (2015). The effect of credit risk management on financial performance of the Jordanian commercial banks. Investment Management and Financial Innovations, 12(1), 338-345.

Search via ReFindit


Balasubramaniam, C. S. (2012). Non-performing assets and profitability of commercial banks in India: assessment and emerging issues. National Monthly Refereed Journal Of Research In Commerce & Management, June, volume, (1), 41-52.

Search via ReFindit


Baltagi, B. (2008). Econometric analysis of panel data. John Wiley & Sons.

Search via ReFindit


Berger, A. N., & DeYoung, R. (1997). Problem loans and cost efficiency in commercial banks. Journal of Banking & Finance, 21(6), 849-870.

Search via ReFindit


Brooks, C. (2014). Introductory econometrics for finance. Cambridge university press.

Search via ReFindit


Chimkono, E. E., Muturi, W., & Njeru, A. (2016). Effect of non-performing loans and other factors on performance of commercial banks in malawi. International Journal of Economics, Commerce and Management, IV, 1-15.

Search via ReFindit


Delmar, F., Davidsson, P., & Gartner, W. B. (2003). Arriving at the high-growth firm. Journal of business venturing, 18(2), 189-216.

Search via ReFindit


Gorter, M. C., & Bloem, M. A. M. (2001). The treatment of nonperforming loans in macroeconomic statistics (No. 1-209). International Monetary Fund Growth and Firm Performance. Strategic Management Journal, 455–472.

Search via ReFindit


Gujarati, D. (1995) Basic Econometrics, 3rd edn., McGraw-Hill, New York.

Search via ReFindit


Kaplan, R. S. & Norton, D. P. (1992).The Balanced Scorecard - Measures The Drive Performance. Harvard Business Review, 92105, 71–79.

Search via ReFindit


Karim, M. Z. A., Chan, S. G., & Hassan, S. (2010). Bank efficiency and non-performing loans: Evidence from Malaysia and Singapore. Prague Economic Papers, 2(2010), 118-132.

Search via ReFindit


Krueger, Anne O. (2000). Conflicting demands on the international monetary fund. American Economic Review 90(2), 38-42.

Search via ReFindit


Lata, R. S. (2015). Non-Performing Loan and Profitability: The Case of State Owned Commercial Banks in Bangladesh. World Review of Business Research, 5(3), 171-182.

Search via ReFindit


Lipunga, A. M. (2014). Determinants of profitability of listed commercial banks in developing countries: evidence from Malawi. Research Journal of Finance and Accounting, 5(6), 41-49.

Search via ReFindit


Masood, O., & Ashraf, M. (2012). Bank-specific and macroeconomic profitability determinants of Islamic banks: The case of different countries. Qualitative Research in Financial Markets, 4(2/3), 255-268.

Search via ReFindit


Mausya, W. B. (2009). The impact of non-performing loans on the performance of the banking sector in Kenya. An MBA project submitted to the University of Nairobi.

Search via ReFindit


Negera, W. (2012). Determinants of Non Performing Loans The case of Ethiopian Banks (Doctoral dissertation, University of South Africa).

Search via ReFindit


Saba, I., Kouser, R., & Azeem, M. (2012). Determinants of Non Performing Loans: Case of US Banking Sector. The Romanian Economic Journal, Year XV, 44.

Search via ReFindit


Tosuni, G. (2013). The impact of corporate governance on the performance of financial institutions (Doctoral dissertation, Staffordshire University).

Search via ReFindit