Does Banking Management Affect Credit Risk? Evidence from the Indian Banking System

Laxmi Koju, Ram Koju and Shouyang Wang
Additional contact information
Laxmi Koju: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China
Ram Koju: Public Administration Campus, Tribhuvan University, Kathmandu 44600, Nepal
Shouyang Wang: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China

IJFS, 2018, vol. 6, issue 3, 1-11

Abstract: This study investigated the impact of banking management on credit risk using a sample of Indian commercial banks. The study employed dynamic panel estimations to evaluate the link between banking management variables and credit risk. The empirical results show that an increase in loan portion over total assets does not necessarily increase problem loans. The findings suggest that high capital requirements and large bank size do not reduce default risk, whereas high profitability and strong income diversification policies lower the likelihood of default risk. The overall empirical results supported the “operating efficiency”, “diversification” and “too big to fail” hypotheses, confirming that credit quality in the banking industry is mainly driven by profitability, banking supervision, high credit standards and strong investment strategies. The findings are relevant to bank managers, investors and bank regulators, in formulating effective credit policies and investment strategies.

Keywords: capitalization; generalized method of moment (GMM); income diversification; non-performing loan; profitability (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.mdpi.com/2227-7072/6/3/67/pdf (application/pdf)
https://www.mdpi.com/2227-7072/6/3/67/ (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:gam:jijfss:v:6:y:2018:i:3:p:67-:d:159514

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().