Determinants of Bank Asset Quality and Profitability - An Empirical Assessment
Vighneswara Swamy ()
MPRA Paper from University Library of Munich, Germany
Determinants of default risk of banks in emerging economies have so far received inadequate attention in the literature. Using panel data techniques, this paper seeks to study the determinants bank asset quality and profitability using robust data sets for the period from 1997-2009. The findings of the study reveal some interesting inferences contrary to the established perceptions. Priority sector credit has been found to be not significant in affecting the NPAs contrary to the general perception and similar is the case with that of rural branches implying that aversion to rural credit is a falsely founded perception. Bad Debts are dependent more on the performance of the industry than other sectors of the economy. Public sector banks have shown significant performance in containing bad debts private banks have continued to be stable in containing the bad debts as they have better risk management procedures and technology, which definitely allows them to finish up with lower levels of NPAs. Further, investigating the effect of determinants on profitability it is established that while capital adequacy and investment activity significantly affect the profitability of commercial banks apart from other accepted determinants of profitability, asset size has no significant impact on profitability.
Keywords: Banks; Risk management; Ownership structure; Financial markets; Non-Performing Assets; Lending Policy; Macro-economy; Central Banks; Banking regulation; Financial system stability (search for similar items in EconPapers)
JEL-codes: E44 E58 G21 G28 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eff and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/47513/1/MPRA_paper_47513.pdf original version (application/pdf)
Journal Article: Determinants of Bank Asset Quality and Profitability: An Empirical Assessment (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:47513
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().