NON-PERFORMING LOANS, MACROECONOMIC AND BANK-SPECIFIC VARIABLES IN SOUTHEAST ASIA DURING COVID-19 PANDEMIC

Ooi Kok Loang, Zamri Ahmad and R.â V. Naveenan
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Ooi Kok Loang: City Graduate School, City University Malaysia, 46100, Petaling Jaya, Malaysia
Zamri Ahmad: School of Management, Universiti Sains Malaysia, Gelugor 11800, Malaysia
R.â V. Naveenan: Symbiosis Institute of Business Management Bengaluru, Bengaluru 560100, Karnataka, India

The Singapore Economic Review (SER), 2023, vol. 68, issue 03, 941-961

Abstract: This study examines the relationship between bank-specific variables, macroeconomic variables and non-performing loans (NPLs) in the seven countries of Southeast Asia (Cambodia, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) during the pre-COVID-19and COVID-19 pandemic. This study adopts panel data regression and distributed lagged regression to examine the impact of bank-specific variables and macroeconomic variables as NPL determinants. The results show that bank-specific variables significantly correlate to NPL, but limited evidence indicates the influence of macroeconomic variables during pre-COVID. Nonetheless, macroeconomic variables are significant to NPL with the emergence of the pandemic, while the bank-specific variables are found to be insignificant. It shows that macroeconomic variables have a greater impact during the turbulent period as they affect most businesses, especially during the pandemic. Furthermore, macroeconomic variables are observed to have a stronger influence on developed countries, but the impact of bank-specific variables is stronger in emerging countries. The results of this study assist policymakers, regulators, banks and governments in identifying the determinants of high NPL as the indicator of a financial crisis. Greater emphasis shall be given to the changes in macroeconomic variables.

Keywords: Non-performing loan; macroeconomic; bank-specific; banking; COVID-19 (search for similar items in EconPapers)
JEL-codes: E50 E60 G21 H60 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0217590822500679

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