 Herding behaviour in the Australian loan market and its impact on bank loan qualityVuong Thao Tran, Hoa Nguyen and Chien Ting Lin Accounting and Finance, 2017, vol. 57, issue 4, 1149-1176 Abstract: We examine the effect of herding behaviour on the credit quality of bank loans in Australia. We find that bank herding varies with different types of loans. It tends to be more prevalent in owner†occupied housing loans and credit cards than other types of loans. During the global financial crisis period, herding in owner†occupied housing loans was most pronounced due to the flight†to†quality phenomenon in the housing sector. Furthermore, we find that the big four banks tend to herd more than smaller and regional banks. Bank herding behaviour is countercyclical, as it is negatively related to real GDP growth and the cost of funding but is positively related to market risk. Regulatory capital requirements may also encourage herding as banks are required to hold less risk†weighted capital for residential loans. Most importantly, bank herding is related to higher impaired assets and therefore lower loan quality. Our findings may have implications for policymakers and bank regulators. Date: 2017 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:57:y:2017:i:4:p:1149-1176 Ordering information: This journal article can be ordered from Access Statistics for this article Accounting and Finance is currently edited by Robert Faff More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC. |
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