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Reduced sample (only banks with positive loan growth): regression results for return on average assets
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During healthy economic/financial times, credit growth often happens without proper provisioning. This is due to a managerial myopia that underestimates the risks underlying an expansive lending policy, leading to lower profitability in following years. However, given the countercyclicality of credit standards, this effect shouldn’t occur during ha...
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Citations
... Lending is one of the profitable operations of commercial banks. Rossi et al. (2021), Wijayanti and Mardiana (2020) asserted that commercial banks' profitability will increase thanks to the expansion of loan growth. Pasaribu and Mindosa (2021) stated that banking is not only the most prominent industry, but also the most vulnerable sector in all countries. ...
The aim of our study is to evaluate the impact of the Covid-19 pandemic on loan growth of commercial banks in Vietnam. The authors used the purposive sampling method, and selected the research sample, consisted of 25 commercial banks in the period of 12 years, from 2010 to 2021. The regression results according to GLS and Robust FEM showed that the Covid-19 pandemic has a negative impact on the loan growth of commercial banks. This relationship implied that the outbreak of the Covid-19 pandemic reduces the repayment capacity and creates barriers for companies and citizens to access bank credit, the decrease in capital needs of companies and people during the Covid-19 crisis is the reason why commercial banks have reduced lending, and the Government needs to focus on assessing the effectiveness of expansionary monetary policies through bank credit channels in the context of the pandemic crisis.
... The effect of credit growth on commercial bank performance was extensively reported in several literatures. The finding of Rossi et al. (2019) ascertained the positive impact of credit growth on profitability. However, (Kohlscheen et al., 2018;Yüksel et al., 2018;Salike and Ao, 2018;Bongini et al., 2019;Tan, 2019;Alihodžić and Ekşi, 2018) also found negative relationship between growth of credit and profitability. ...
The effectiveness of the financial market is reflected in the financial crisis which mostly results in credit risk. The impact of credit risk in China is likely to affect the global economy since China is the fastest‐growing economy as well as the second‐best economy in the world in terms of gross domestic product. Using panel data for twenty‐eight listed commercial banks in China from 1990 to 2020, the study explored the relationship between credit risk and business performance. The authors utilized the Generalized Methods of Moments (GMM) as the primary estimator while the Pooled Mean Group (PMG) was used as a robust estimator. A negative and statistically significant relationship was found between non‐performing loan and return on equity, as well as loan loss provision and profitability of the bank. On the contrary, capital adequacy ratio revealed a positive and statistically significant relationship with bank performance. Credit growth on the other hand recorded positive but insignificant relationship with performance of banks. The findings will add up to existing literature on credit risk and business performance of commercial banks.
... Alkhazaleh (2017) and Moussa and Chedia (2016) found the return on assets has a positive impact on the volume of bank lending. Rossi et al. (2019), Dang (2019), and Antoni and Nasri (2015) provide empirical evidence that there is a positive relationship between loan growth and profitability. ...
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Lending is the primary role in commercial banks' daily banking activities and is described as the heart of a commercial banks' banking business. On the other hand, it is also one of the greatest sources of risk to the safety and soundness of financial institutions. There is little empirical evidence on bank lending behavior in emerging markets like Ethiopia. However, the existing studies have a difference in the identification of which factors have a strong impact and on the direction of those impacts if any on Ethiopian commercial banks' lending. Thus, this study investigated the bank-specific, industry-specific and macroeconomic determinants of commercial banks' lending in Ethiopia using balanced panel data of 15 commercial banks from 2011 to 2019. To realize the stated objective quantitative approach and explanatory design were employed using secondary data sources from the audited financial statement of sampled commercial banks. The model result of the study indicated that bank-specific factors such as; volumes of deposit, capital adequacy, and bank size have a positive and statistically significant effect on bank lending. Industry-specific factors such as; cash reserve requirement, bank concentration, and average lending rate have a negative and statistically significant effect on bank lending. Likewise, one of the macroeconomic variables gross domestic products has a negative and statistically significant effect on bank lending.
... Alkhazaleh (2017) and Moussa and Chedia (2016) found the return on assets has a positive impact on the volume of bank lending. Rossi et al. (2019), Dang (2019), and Antoni and Nasri (2015) provide empirical evidence that there is a positive relationship between loan growth and profitability. ...
... One of the plausible explanations regarding the negative and insignificant effect of profitability on banks lending could be the commercial banks in Ethiopia might not rely too much on their profitability as a criterion to evaluate their loan application from the public rather mostly depend on the repayment capacity of the borrowers and the volume of deposit available for loan. This result is against the findings of Rossi et al. (2019), Dang (2019), and Alkhazaleh (2017) established a positive relationship between loan growth and profitability. Theoretically, the high proportion of liquid assets held by the bank will directly reduce the funds available for loans. ...
Lending is the primary role in commercial banks’ daily banking activities and is described as the heart of a commercial banks’ banking business. On the other hand, it is also one of the greatest sources of risk to the safety and soundness of financial institutions. There is little empirical evidence on bank lending behavior in emerging markets like Ethiopia. However, the existing studies have a difference in the identification of which factors have a strong impact and on the direction of those impacts if any on Ethiopian commercial banks’ lending. Thus, this study investigated the bank-specific, industry-specific and macroeconomic determinants of commercial banks’ lending in Ethiopia using balanced panel data of 15 commercial banks from 2011 to 2019. To realize the stated objective quantitative approach and explanatory design were employed using secondary data sources from the audited financial statement of sampled commercial banks. The model result of the study indicated that bank-specific factors such as; volumes of deposit, capital adequacy, and bank size have a positive and statistically significant effect on bank lending. Industry-specific factors such as; cash reserve requirement, bank concentration, and average lending rate have a negative and statistically significant effect on bank lending. Likewise, one of the macro-economic variables gross domestic products has a negative and statistically significant effect on bank lending. The study suggested that commercial banks in Ethiopia have to manage their lending by giving more attention to the internal factors, which the management has control over in line with the banking industry rules and regulations recalling the influence of the general economic dynamic. I believe that this study is of interest to bankers, analysts, regulators, policymakers, and investors since it provides useful insight on the determinants of commercial banks’ lending and an understanding of how bank intermediation roles may respond to internal as well as external rules, regulations, and general economic dynamics, and it will contribute to the scarce empirical evidence.
This paper investigates the non-linear impact of loan growth on profitability of Vietnamese joint stock commercial banks. The quantitative method is used to analyze the secondary data from the audited financial statements of 24 banks during the period 2009 - 2019. According to the GLS regression results, the loan growth has a positive effect on profitability, and it also has a non-linear effect with the inverted-U sharpe on profitability. In order to ensure the profitability goals, the article recommends that these banks determine the threshold of loan growth to adjust the current loan growth policy and make loan decisions based on the matching between the characteristics of customer groups and the banks’ resource limitation.
