How Banks Can Leverage Credit Risk Evaluation to Improve Financial Performance

Daniul Thomas Isenberg, Mesbaul Haque Sazu and Sakila Akter Jahan
Additional contact information
Daniul Thomas Isenberg: Hofstra University, New York, USA
Mesbaul Haque Sazu: Case Western Reserve University, Cleveland, USA
Sakila Akter Jahan: Illinois State University, Normal, USA

CECCAR Business Review, 2022, vol. 3, issue 9, 62-72

Abstract: The research aims to examine the impact of credit risk evaluation on the financial performance of American and European commercial banks during the period 2017-2021. A set of 37 commercial banks were selected to represent the entire banking industry of those two continents. To measure this relationship, two mathematical models were created. Research has revealed that credit risk evaluation influences the financial performance of the American and European commercial banks as represented by ROE and ROA. The study also concludes that the credit risk evaluation indicators analyzed in this study have a substantial effect on the financial performance of American and European commercial banks. The study suggests banks enhance their credit risk evaluation to generate more profits. It also cites the indicators of non-performing loans or gross loans, provision for facilities loss/net facilities, as well as the leverage ratio as significant in determining credit risk evaluation. Banks must put together strategies that will not only limit the banks’ exposure to credit risk, but also enhance the banks’ performance, as well as competitiveness. Further research can be conducted in developing nations to understand the impact of credit risk evaluation in such economies.

Keywords: credit risk; financial performance; commercial banks (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.ceccarbusinessreview.ro/how-banks-can- ... -a252d/download-PDF/ (application/pdf)
https://www.ceccarbusinessreview.ro/how-banks-can- ... ance-a252a/abstract/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ahd:journl:v:3:y:2022:i:9:p:62-72

DOI: 10.37945/cbr.2022.09.07

Access Statistics for this article

CECCAR Business Review is currently edited by Robert-Aurelian ȘOVA

More articles in CECCAR Business Review from Body of Expert and Licensed Accountants of Romania (CECCAR)
Bibliographic data for series maintained by Radu CIOBANU ().