Non-performing loans (NPLs) and non-performance: evidence from South Asian banks

Probir Kumar Bhowmik and Niluthpaul Sarker
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Probir Kumar Bhowmik: University of Barishal
Niluthpaul Sarker: Jagannath University

International Journal of Research in Business and Social Science (2147-4478), 2024, vol. 13, issue 2, 197-206

Abstract: This paper examines the consequences of banks’ performance on bank risk. The paper forms a theoretical model and delivers empirical evidence to identify that banks suffer in performance as the loans become bad. Using panel data from a sample of five (05) South-Asian emerging economies from 2011 to 2019, we have found that the banks are highly influenced by the development of non-performing loans (NPLs). We have primarily used Return on Asset (ROA) followed by Return on Equity (ROE) as a substitution to the performance of the banks and NPL as the proxy of bank risk. Simultaneous regression applying 3sls finds that Non-Performing Loan (NPL) hinders banks' growth, negatively affecting their profitability. Key Words:Profitability, Banking, Non-performing Loans, FGLS, 3SLS

Date: 2024
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