 Consequences of Bank Loan Growth: Evidence from AsiaNo 19, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research Abstract: When an increase in bank loans does not immediately lead to a hike in non-performing loans, bank loan officers (and/or bank managers) whose compensation is based on the value/amount of loans granted have incentives to grant more loans to (potentially lower credit quality) borrowers, which should increase the banks' profits (and their personal compensation) in the short run. Using a sample of publicly listed banks in 18 countries in Asia during the period 1990–2014, I show that banks' loan growth rate has a negative short-run effect on their nonperforming loans and a positive short-run effect on their profitability. While the loan growth rate does not increase non-performing loans in the short run, there is some evidence to suggest that it increases non-performing loans in the long run. The results further indicate that banks' profitability is not affected by the level of loans but by the loan growth rate. Keywords: Asia; financial crisis; loan growth; non-performing loans; profitability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pui:dpaper:19 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research Contact information at EDIRC. |
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