Determinants of the non-performing loans of Commercial Banking Institutions in Malaysia
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Date
2010
Authors
Isahak, Zurairah
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Abstract
Credit risk that affects the failure of the bank institutions have been an important discussion amongst bankers and economist. The non-performing loans are the yardstick to measure credit risk. This study attempts to explore the specific bank factors that contribute to these nonperforming loans. Eight commercial banks have been the subject for the study ranging 2000 to 2008. The bank's financial statement has been the main source for the study and the panel analysis has been carried out to obtain the result for this empirical study. The study begins with the two tests namely F-test ( Pooled OLS Model versus Fixed Effect Model) and Hausman test (Random Effect Model versus Fixed Effect Model) to determine the most suitable model to be used in this study. The empirical analysis supported the two variables used in this study, where loan growth showed a positive relationship with the dependent variable while interest income indicates negative movement with non-performing loans. Meanwhile bank size, risk profile and the maturity of loans have been found given insignificant impact on non-performing loans.