Bank Credit Research Articles

Credit expansion and economic growth in India: empirical evidence

Expansion in credit is often considered as catalyst to economic growth. However, several studies dispute such relationship and argue that the expansion of credit may not always accelerates economic growth. Using national and state level data, we examine the association between expansion of bank credit and economic growth in India. We apply time series and panel data econometric techniques to examine the linkage between credit expansion and economic growth in India. Our findings suggest that at national level, increase in credit-GDP ratio decelerates economic growth. While using state level data, we observe a positive association between credit-NSDP ratio and the NSDP growth rate among the states with lower growth rate. Whereas the relation is found to be negative among the states with comparatively higher growth rate. Our study conclude that generalised policy of credit expansion may not be suitable to accelerate growth across states with different levels of economic growth.

Exploring the Nexus between Macroeconomic Variables and Stock Market Returns in Nepal: An ARDL Bounds Testing Approach

Background: Investors and policymakers must understand how macroeconomic variables (MEVs) affect stock market behavior to maximize portfolios and maintain economic stability. Hence, it is crucial to establish a nexus between MEVs and stock market returns (SMRs). Objectives: This study seeks to assess the effects of MEV on SMRs in the long and short run. Methods: This paper analyzed the cointegrating relationship between MEVs and SMRs using a time series data set from 1994 to 2023. This study used the ARDL bounds testing approach. Results: The results confirm a cointegrating association between MEVs and SMRs in the Nepalese stock market. The error correction (ECT -1) term is significantly negative, suggesting a persistent correlation between the variables. The study also shows that interest rates negatively affect SMRs over time. Real GDP (LRGDP), inflation (LINFR), and exchange rate (LEXR) have negative but statistically insignificant associations with SMRs. However, the money supply (LMS) positively correlates with SMRs. Conclusion: The study’s findings provide practical advice for policymakers. For instance, lower interest rates increase the appeal of stocks by reducing the opportunity costs of holding bank deposits and credit costs. Therefore, policymakers are advised to maintain lower interest rates to cultivate a more appealing investment environment. Furthermore, policymakers should prioritize regulating inflation and preserving a robust foreign exchange rate to boost investors’ SMRs.

Relationship between Bank Credit and Economic Growth: Evidence from Nepal

Bank credit serves as the lifeblood of economic activities. The paper aims to investigate how bank credit contributes to economic growth by employing the ARDL model, spanning the period 1975 to 2023 in Nepal. The observed empirical analysis shows a positive short-run and long-run association between bank credit and the growth in the economy. The findings of the study suggested that policymakers should focus on increasing credit by the banking and financial sectors to boost economic growth in the long run.

Bank Regulations and Credit Risk of Nepalese Commercial Banks

Purpose of this study is to measure the impact of banking regulations specifically base rate, weighted average spread rate, bank capital, loan loss reserve, and broad money supply on credit risk of commercial banks in Nepal. Descriptive, correlational, and casual comparative research design have been used in this study. This study is based on secondary sources of data. Data were collected from annual audit reports of twenty- six commercial banks from fiscal year 2012/13 to 2018/19 out of twenty- seven, and from fiscal year 2020 to 2022, nineteen commercial banks out of twenty. Rastriya Banijya Bank (RBB) as a Government owned bank has been excluded in this study. The mean, range, standard deviation, coefficient of variation, correlation analysis, and multiple regression analysis statistical tools were used in this study. This study reveals that loan loss reserve is highly scattered than after bank capital, credit risk, broad money supply, base rate, and weighted average spread rate respectively. There is significant positive relationship of credit risk with bank capital, loan loss reserve, and broad money supply. Study results revealed that there is significant impact of bank capital, loan loss reserve, broad money supply, and base rate on credit risk.

Combat counterfeits effectively or not? Encroachment and financing strategies with production disruption risk

AbstractCounterfeits spur brand‐name supply chain to engage in manufacturer encroachment. Financial constraint disturbs encroachment strategies, especially with disruption risks. Developing an analytical model investigates how supply chain finance with production disruption risk affects encroachment strategy and its efficacy in combating counterfeits. We obtain optimal strategies for three scenarios: rich, moderately poor, and poor brand‐name supply chains. Encroachment strategies effectively combat counterfeits in rich and moderately poor brand‐name supply chains. The production disruption risk reduces the manufacturer's willingness to encroach, regardless of financial positions. Relative to rich brand‐name supply chains with encroachment, trade credit with risk‐free bank credit increases the manufacturer encroachment's likelihood, while it with costly bank credit reduces this likelihood. Financial cooperation through trade credit in moderately poor brand‐name supply chains effectively curbs counterfeiting. Even if bank credits are perfectly competitive, optimal strategies in poor brand‐name supply chains with encroachment depend on initial capitals, violating classical Modigliani‐Miller (M&M) theory.

Pengaruh Rasio Keuangan Terhadap Return on Asset dengan Capital Adequacy Ratio sebagai Variabel Moderating pada Bank Perkreditan Rakyat di Kepulauan Riau

Technological developments, especially with the emergence of the internet and digital devices, have brought major changes to the world of banking. People's Credit Banks (BPR) have an important role in supporting community businesses, especially at the local or regional level. The following are some of the main roles played by BPR Banks in supporting community businesses. Research carried out at people's credit banks (BPR) in the Riau Islands registered with the OJK throughout 2019-2023. In this research, the author used the purposive method technique, which is a technique chosen by the researcher to achieve the researcher's objectives with the criteria that have been set so that there are 17 companies that meet the criteria. Based on the processed data obtained in the field, the final research results were found to be non- Performing Loans (NPL) have a direct significant effect on Return on Assets (ROA), Loan To Deposit Ratio (LDR) do not have a direct significant effect on Return on Assets (ROA) at Rural Banks (BPR) Batam City, Operational Costs Operational Income (BOPO) has a direct significant effect on Return On Assets (ROA) at Rural Banks (BPR) in Batam City, Capital Adequacy Ratio (CAR) does not significantly moderate between Net Performing Loans (NPL) and Loan To Deposit Ratio (LDR) on Return on Assets (ROA) at Rural Banks (BPR) in Batam City and the Capital Adequacy Ratio (CAR) significantly moderate the relationship between Operational Costs and Operating Income (BOPO) against Return On Assets (ROA) at Rural Credit Banks (BPR).

Bank Performance and Capital Formation in Pakistan

In Pakistan, during the last decade, the banking sector has experienced a reduction in the number of banks and their operations. This paper investigates the impact of banks' performance on capital formation in Pakistan. The country's investment level has been low, attributed to various factors. This study specifically examines the relationship between banks' performance and capital formation. Gross Fixed Capital Formation (GFCF) is the dependent variable, while major indicators of banks' performance serve as the independent variables. The study employs time series annual data from 1981 to 2023, comprising 43 observations. Auto Regressive Distributed Lag (ARDL) tests have been conducted to analyze the long-term and short-term relationships among the variables. The results reveal both long-term and short-term relationships between GFCF and the selected indicators of banks' performance. Total deposits, bank credit to the private sector, and banks' profitability show a positive relationship with capital formation. The study concludes that banks' performance in Pakistan significantly impacts capital formation. A robust banking system in Pakistan could facilitate efficient investment in the country.

Response analysis of primary agricultural credit societies and farmers towards bank credit in coastal area of Maharashtra

Response analysis of primary agricultural credit societies and farmers towards bank credit in coastal area of Maharashtra

Doing good in times of need: Green finance policy and strategic corporate social responsibility

This study investigates the effect of a green finance policy on the corporate social responsibility (CSR) activities of firms in heavily polluting industries. Based on the 2017 policy of the People's Bank of China (PBC), which incorporates green finance into its macroprudential assessment system, we employ the difference-in-differences method to show that firms in heavily polluting industries have significantly improved their CSR performance after the implementation of the PBC's green finance policy. In response to the negative effect of the PBC's policy on their financial position, affected firms strategically engage in CSR activities in the hope that appearing socially responsible will help them recover from their adverse position. Furthermore, firms in heavily polluting industries that enhance their CSR performance after the PBC's policy have benefited from reduced bank credit transaction costs and have obtained more bank loans. The improvement in CSR performance is mainly concentrated in firms that are non-state-owned, small in size, highly dependent on external financing, and receiving more media attention. Overall, this study reveals a social consequence of the PBC's green finance policy on the CSR performance.

How does macroprudential policy affect the relationship between financial openness and bank risk-taking

This paper investigates how macroprudential policy affects the relationship between financial openness and bank risk-taking by utilizing Chinese commercial banking data from 2005 to 2021. We find that financial openness generally promotes bank risk-taking. Robustness checks consistently support this finding, including variable substitutions, sample period adjustments, controlling for other shocks, and endogeneity concerns. The impact of financial openness on risk-taking demonstrates potential heterogeneity, contingent upon factors such as bank financing constraints, risk management, and financial regulation. We delineate credit, interest rate, and asset price channels through which financial openness affects bank risk-taking, notably by amplifying bank credit volumes, diminishing credit asset ratios, compressing net interest margins and spreads, and elevating asset prices. Macroprudential policies are identified as effective countermeasures against the heightened bank risk-taking associated with financial openness, with the effectiveness of these policies varying by the specific regulatory instruments.

The Effect of Reward, Punishment and Workload on Employee Performance at The People's Credit Bank in Palembang City

This study was conducted with the aim of determining the influence of rewards, punishments, and workload on employee performance at the People's Credit Bank in the city of Palembang. The population in this study is all active employees in the marketing department of the People's Credit Bank in the city of Palembang who are still actively operating in 2024 as many as 14 companies. The sample was taken from a minimal number because the number of the population is not known for sure, so the number of samples in this study is 136 people. The results of multiple linear regression analysis show that rewards, punishments and workload have a positive and significant effect on employee performance. Rewards, gifts and bonus payments to employees who can meet the target or even exceed the set target must be appropriate, fair and transparent and also paid on time. Punishment, it is hoped that this punishment will be given fairly to all employees. Workload, it is hoped that companies can also evaluate the provision of work achievement targets that must be met by employees, especially in the marketing department.

Impact of bank of agriculture credit’s on agricultural productivity in South Western Nigeria

This study examined the impact of Bank of Agriculture (BOA) credit facilities on agricultural productivity in the South-West region of Nigeria. A multi-stage sampling technique was employed to select 225 beneficiaries and 630 non-beneficiaries farmers. Descriptive statistics were implemented to investigate the socio-economic attributes of the respondents. Impact of credit was analyzed using Propensity Score Matching (PSM), and the productivity of producers was analyzed using Total Factor Productivity (TFP). The respondents' average age was 47.6 years, and 87.0% of them were male. The average PSM score was 0.269, with four matching methods (Nearest Neighbour, Radius, Kernel, and Stratification matching) being implemented. The maximum and minimum propensity were 0.8207 and 0.0525, respectively. Both the balancing property and the region of common support (0.0503, 0.8209) were satisfied. The average treatment effect on the productivity differences of the treated (ATT) was approximately 0.347, and this difference was statistically significant at the 1% level. Productivity of ATT varied by approximately 21.0%. In summary, this investigation provided compelling evidence that the BOA credits have a positive impact on agricultural productivity in the South West. It was suggested that administrations at all levels and financial stakeholders should collaborate to ensure that producers have access to credit.

How Does Financial Development Affect the Volume of Nuclear Energy? Assessing The Relationship Between Nuclear Energy and Finance

The main objective of this study is to reveal the relationship between the volume of nuclear energy, which is becoming increasingly important as a clean energy source in today's world where the effects of environmental pollution are widely discussed, and financial indicators within the framework of nuclear energy producing countries. The study analyzes the relationship between the variables of domestic bank credit to the private sector (per capita) and gross capital formation (per capita) and the volume of nuclear energy per capita for the period 1970-2022. In the study, the panel cointegration test developed by Olayeni et al. (2020) was used to determine the long-run relationship between the variables. In addition, the coefficients were calculated using the cointegration estimator proposed by Bai (2009). According to the results of panel Fourier cointegration test, cointegration relationship is detected in all panel countries according to both PP and GLS values. According to the results of panel cointegration coefficient estimates, the CRD variable has a negative effect on the NUC variable, and the CAP variable has a positive and statistically significant effect. To the best of our knowledge, there is no study in the literature that examines the relationship between the per capita amount of bank loans to the private sector, the per capita amount of gross capital, and nuclear energy to understand the dynamics and impact of the financial and energy sectors on environmental and economic sustainability. It is thought that the study will make an important contribution to the related literature in this respect.

Study on the Effect of Extreme Weather on Bank Credit Risk

In the global economic landscape, the potential impact of extreme weather issues on banks has attracted much attention. This study focuses on the impact of extreme weather on the credit risk of A-share listed banks and explores its role in financial stability. Given China's significant position in the global economy, analyzing the credit risk faced by its banking sector has both theoretical and practical value. By synthesizing bank financial data, weather records and macroeconomic indicators, this study quantifies the potential impact of extreme weather events on bank credit risk, taking into account the moderating effects of heterogeneity among bank types and regional bank competition. The results reveal the existence of an association between extreme weather and bank credit risk-taking and provide a basis for bank risk management and regulatory policies.

Does government dual-target management affect local bank credit structure? Evidence from China

This study empirically examines the impact of government dual-target management of economic growth and environmental constraints on bank credit structure, by taking 231 local commercial banks in China from 2008 to 2022 as the sample. It was found that although economic growth target increases the similarity of bank loans’ industrial structure, the introduction of environmental constraint target significantly weakens this impact. Mechanism analysis suggests that the implicit guarantee role of the government and intensifying competition among banks are important influencing mechanisms. Furthermore, the effect exhibits heterogeneity due to differences in economic cycles, city development levels, and bank capital adequacy ratios. The findings have important implications for government target setting and management, as well as for preventing banking financial risks.

The relationship between technology infrastructure and bank credit: How should management promote ASEAN economies?

Purpose: This study aims to analyze the causal relationship between technology infrastructure and bank credit, as well as the impact of this relationship on economic growth in ASEAN economies. Design/methodology/approach: To achieve this objective, the authors model the simultaneous relationship between these factors using a panel vector autoregressive (PVAR) approach. Findings: The estimation results indicate a positive correlation between technology infrastructure and bank credit. Furthermore, technology infrastructure plays a crucial role in promoting economic growth, while bank credit can indirectly influence economic growth through technology infrastructure, a novel finding compared to previous studies. Besides, the authors identify significant effects of government spending, foreign direct investment, and trade on economic growth. The findings provide a reliable foundation for the ASEAN economies to develop appropriate policies regarding the management of technology infrastructure and bank credit to stimulate economic growth. Originality/value: This study aims to analyze the causal relationship between technology infrastructure and bank credit, while also examining the impact of this relationship on economic growth in ASEAN economies. The findings are also expected to provide ASEAN economies with valuable and meaningful insights.

Greenwashing of Corporate Carbon Information and Availability of Bank Credit

In recent years, as China's economy has gradually shifted to high-quality development, climate policies and sustainable finance have received widespread attention. In the current era of promoting the "dual-carbon" strategy, green finance plays an indispensable role in helping corporates achieve green transformation. However, it has been found that greenwashing behavior by corporates exists to different degrees in the environmental information disclosure of listed companies in China, and the phenomenon of selective disclosure and only talking about environmental performance is particularly prominent. Given that carbon information disclosure has become one of the credit standards for financial institutions to provide loans, this greenwashing behavior may hinder financial institutions from providing green loans and lead to an uneven distribution of credit resources. Based on the data of listed manufacturing companies in China from 2013 to 2022, this paper uses text analysis to measure the "greenwashing" behavior of corporates in terms of carbon information and discusses the impact of such speculation on the availability of bank credit. The study finds that the "greenwashing" behavior of corporates in terms of carbon information can improve the availability of bank credit. Moreover, this credit resource access effect is stronger in non-state-owned corporates, low-value corporates and corporates with high information opacity. However, this paper also confirms that media supervision and regional environmental regulations can mitigate the impact of cleaning on financing. The research results of this paper have policy significance for the sustainable development of corporates.

The Role of Development and Commercial Banking in Promoting Economic Growth in Mexico: A Sectoral Analysis

This study examines the impact of credit extended by both commercial and development banks on exports, GDP, and FDI across different sectors in Mexico. The research lies within the broader context of financial sector development and its role in promoting regional development and economic growth. We use panel data techniques to compare traditional models that include only commercial bank credit with models incorporating development bank credit. Our results emphasize the different and complementary roles of commercial and development banks. The latter is crucial in addressing market failures and supporting long-term, socially and economically beneficial projects. The study concludes that development bank credit should be integrated into economic studies to better understand its contribution to sustainable growth. It suggests that policymakers should coordinate the roles of both banking sectors to foster a balanced and resilient economy.

Value relevance of bank credit risk disclosure: “interventionist” and “non-interventionist” supervisory regimes

Value relevance of bank credit risk disclosure: “interventionist” and “non-interventionist” supervisory regimes

DMBs Credit Disbursements and Real Sector Financial Performance in Nigeria

he study examines the impact of DMBs credit disbursements and real sector financial performance in Nigeria over the period from 1994 to 2023. The credit sources considered were; commercial banks, though study extended its insights into merchant banks, microfinance banks, and development banks and how they influenced classified sectors like; the agricultural, industrial, and service sectors. The study employed secondary data gotten from the CBN statistical Bulletin. The study employed an Autoregressive Distributed Lag (ARDL) estimation. The findings reveal that the R-squared values vary significantly across models, indicating differing levels of predictive accuracy. The agricultural sector shows the highest R-squared value of 0.9981, suggesting that credit from these institutions has a substantial impact on this sector’s contribution to GDP. Conversely, the industrial sector exhibits the lowest R-squared value of 0.9907, indicating a lesser degree of predictability and impact from credit types. The service sector demonstrates an intermediate R-squared value of 0.9910, reflecting a moderate level of influence from financial credit. The findings indicate varied effects of different types of credit on sectoral contributions. Commercial banks’ credits did not significantly influence the agricultural sector but showed a significant positive impact on the service sector. In contrast, merchant banks’ credits had a significant effect on both the agricultural and service sectors, while their impact on the industrial sector was not significant. Microfinance banks’ credits demonstrated a marginally significant impact on the agricultural sector but had no significant influence on the industrial and service sectors. Development banks’ credits did not significantly affect the agricultural or industrial sectors but had a significant positive impact on the service sector. Based on these findings, the study recommends that commercial banks focus on increasing credit support to the service sector to sustain its contribution to GDP. Merchant banks should enhance their credit support to the agricultural sector to leverage its potential for economic growth. Microfinance banks are encouraged to refine their lending strategies to better impact the agricultural sector, possibly through targeted programs that address specific needs of small-scale farmers. Development banks are advised to continue their support to the service sector, ensuring that credit interventions are aligned with sectoral growth objectives. Keywords: DMBS, Commercial Bank Credits; Real sector; Nigeria.