Impact Of Credit Risk Management Research Articles

INVESTIGATING THE IMPACT OF CREDIT RISK ON FINANCIAL PERFORMANCE OF COMMERCIAL BANK IN INDIA

In this liberalization period, credit Risk Management has got much importance in the Indian Economy. The main challenges faced by the banking sector today are the challenge of identifying the risk and managing it. The risk is imbibed nature of the banking business. The main role of a bank is of intermediate for those having resources and requiring resources. For risk management various risks like credit risk, market risk or operational risk have to be converted into one composite measure. The importance of credit risk management and its impact on profitability has motivated us to pursue this study. We assume that if the credit risk management is sound, the profit level will be satisfactory. The other way around, if the credit risk management is poor, the profit level will be relatively lower. Because the less the banks loss from credits, the more the banks gain. Therefore, it is necessary that measurement of credit risk should be in tandem with other measurements of operation and market risk so that the requisite composite estimate can be worked out. So, in banking sector credit risk management is being most important task of all. Moreover, the central question is how significant the impact of credit risk management on profitability is. This thesis is an endeavor to find the answer. The principal concern of this thesis is to ascertain to what extent banks can manage their credit risks, what tools or techniques are at their disposal and to what extent their performance can be augmented by proper credit risk management policies and strategies.

The Impact of Credit Risk Management on Commercial Banks Performance in Democratic Republic of the Congo

The Impact of Credit Risk Management on Commercial Banks Performance in Democratic Republic of the Congo

Impact of credit risk management on provisioning expectations: Evidence from U.S. banks during the subprime crisis

This paper examines changes in the provisioning expectations of U.S. banks during the 2007–2009 subprime crisis. We used Bushman Williams (2015)’s model for delayed expected loss recognition (DELR) to create a statistic that captures a relative estimate of the timeliness of bank provisions. Our findings show that there was a large decline in DELR during the subprime crisis period. We demonstrate that it was the banks with an officer or a committee dedicated to analyzing credit risk that had the greatest improvement in their provision expectations.

Impact of Credit Risk Management on Return on Equity in the Indian Banking Sector

Impact of Credit Risk Management on Return on Equity in the Indian Banking Sector

Credit Risk Management on Financial Performance of Selected Microfinance Institutions

The purpose of this study was to look at the impact of credit risk management on the financial performance of a few Kenyan microfinance firms. The study's approach was a descriptive survey research design and a panel data analysis technique. The study comprised credit managers from all 52 Kenyan microfinance institutions registered in the Association of Microfinance Institutions in Kenya (AMFI) database. The study included all of the institutions that were targeted. The questionnaire, which had previously been tested on local microfinance banks in Kakamega County, was used to collect data. Data analysis included regression analysis and correlation. Throughout the data collection process, the researcher observed integrity. Tables were used to present the study's findings. According to the model summary, credit risk management accounts for 49.1% of the variance in the financial performance of Kenyan MFIs, while other factors not included in the study model account for the remaining 50.9%. With a p-value of 0.01 that is statistically significant. Multiple linear regression analysis revealed that a one-unit change in credit risk management resulted in a significant improvement of 0.672 units in microfinance institution performance (= 0.672 (0.087); at p.01). The study found that prudent and effective credit risk management boosts net profit margins, return on capital invested, and cash flow. The study adds to existing theories by emphasizing the importance of credit risk management in microfinance, lays the groundwork for future research, and advises Kenyan microfinance organizations to invest in efficient credit risk management to improve their financial performance. The report also suggests that studies on Savings and Credit Cooperative Societies (SACCOs) be conducted to compare study findings and that the Association of Microfinance Institutions do studies on non-registered microfinance across the country.

Prediction of Bankruptcy and Impact of Credit Risk Management on Profitability of Commercial Banks in India: A Study

Banking system of a country plays a leading role in its economic development. India is also not isolate from such fact. Indian banking system plays a crucial and impactful role in both Individual and economy progress. Since the huge major flow of money into economy is controlled by banking system in India, the system policies, operational efficiencies are having linear impact on the economic development of the country. The efficiency of the banking industry of the country is the sign of economic development and public commercial banks will have to face the competition of private commercial banks as well. Hence, the present study objective is to predict the solvency condition of Indian public commercial banks and the impact of credit risk management on the profitability of commercial banks in India. To fulfil the objectives of the study, the study has been used the secondary data extracted from annual reports of the top three public commercial banks for the period from 2012 to 2022. The data were analysed using a descriptive statistics and panel data regression model and the bankruptcy is predicted using Altman’s Z Score model. the results found that, public sector Indian commercial banks under the pressure to experience the bankruptcy and there is no significant impact of credit risk management on profitability of commercial banks in India.

Credit risk management and profitability: Evidence from Palestinian banks

Credit risk has gained considerable attention in most countries of the world intending to manage the efficiency of credit portfolios. This study attempts to examine the impact of credit risk management on bank profitability. The local Bank of Palestine provided secondary data over a ten-year period (2010–2020) collected from financial annual reports. The statistical analysis is carried out using the SPSS and E-views software, and the study hypotheses are verified using descriptive statistics, multicollinearity tests, and regression. Palestinian banks’ profitability was evaluated using return on assets, along with bank-specific metrics such as capital adequacy ratio (CAR), loan-to-deposit ratio (LDR), non-performing loans (NPLs), loan loss provision ratio (LLPR), bank size, and bank age, as signs of credit risk management. The study’s findings indicate that there are differences in how credit risk management affects bank profitability in the context of Palestine. CAR NPLs have a positive but insignificant effect on profitability using ROA. The regression found a significant positive effect of LLPR on profitability using ROA. Finally, with respect to LDR as an indicator of credit risk management, the regression found its negative but insignificant effect on profitability using ROA. The results demonstrate how the board’s structure influences the performance of a company, which is regarded important knowledge for decision makers.

Impact of Credit Risk Management on Bank Performance: An Empirical Study on Commercial Banks Listed at Pakistan Stock Exchange (PSX)

Commercial banks are involved in uncontrolled credit risk management that negatively affects their sustainable banking performance. Many guidelines, strategies, and judgments have been made, such as the Basel Accords, to control these issues and adequately manage their lending and borrowing policies. This study aims to analyse the impact of credit risk management on the sustainable performance of commercial banks. For this purpose, secondary panel data was collected from the annual financial reports of 27 commercial banks out of the 31 listed on the Pakistan Stock Exchange (PSX) for the period 2017-2021. E-views 10 software was applied to perform descriptive correlation and multiple regression analyses. In the current study’s model, credit risk management proxies, return on assets (ROA), return on equity (ROE), and net interest margin (NIM) were employed as dependent variables. At the same time, capital adequacy ratio (CAR), loan and advances (LA), non-performing loans (NPL) ratio, market profit opportunity (MPO), and bank liquidity (BL) were employed as independent variables. The study concludes that bank liquidity has a significant positive relationship with bank performance. Comparably, capital adequacy ratio, non-performing loans, bank liquidity, market profit opportunity, and loan and advances harm the sustainable performance of commercial banks. The research suggests that implementing stricter policies and strategies, such as the regulation of customer loans, is required to control these issues.

Impact of credit risk management on the financial stability of Vietnamese commercial banks

The research was conducted to understand the impact of credit risk management on the financial stability of 27 Vietnamese commercial banks. From the research results, the authors proposed some implications for credit risk management and solutions to promote financial stability for banks. The study used secondary data obtained from audited financial statements of banks in the period 2006 - 2020. Because the research model had intermediate variables, we used SEM to analyze and the data was processed by Stata. Research results show that non-performing loans and loan loss provisions had a direct effect on profitability and financial stability. Besides, there was an indirect relationship between credit risk management, profitability, and financial stability. The research proved whether the characteristics of Vietnam's banking system and the obtained results are compatible with the theory and previous studies.

Credit risk management and deposit money banks’ profitability in Nigeria: A panel data regression approach

This study investigates the impact of credit risk management on DMBs’ profitability in Nigeria using panel data covering a time period of 11 years, from 2009 to 2019. The longitudinal research design was adopted since the data spanned a specific timeframe. Three different models were estimated with ROA, ROE and ROI serving as the dependent variables, while NPL, LLP, BL and BS constituted the independent variables across the three models. The findings of the study showed that both the NPL and BL variables exerted negative impacts on ROA, ROE and ROI across the three models. The LP variable exerted a positive impact on ROA in model one, but showed negative impacts on ROA, ROE and ROI in models two and three. The adjusted R-squared values of 0.17, 0.59 and 0.67 suggest that the explanatory powers of the independent variables are somewhat low. The values of the DW statistics stood at 2.01, 2.23, and 2.11, indicating that the respective estimated models were free from the presence of autocorrelations. Based on these empirical findings, the study concluded that effective CRM strategies are a panacea for enhancing DMBs’ profitability. It is, therefore, strongly recommended that both the regulatory authorities and the top management of the DMBs in Nigeria should, as a matter of urgency and deliberate efforts, introduce appropriate CRM policies that are designed to reduce the already high profiles of NPL and LLP to increase profitability among the DMBs.

Impact of Credit Risk Management on Profitability of Nepalese Commercial Banks

This study examines the impact of credit risk management on profitability of Nepalese commercial banks. Default rate, cost per loan assets and capital adequacy ratio are the independent variables used in this study. The dependent variables are return on assets (ROA) and return on equity (ROE). The secondary sources of data have been used from annual reports of selected commercial banks and supervision report of Nepal Rastra Bank. The regression models are estimated to test the significance and effect of credit risk management on profitability of Nepalese commercial banks. The beta coefficient of default rate and cost per assets with profitability (ROA, ROE) has been found negative and statistically significant. The negative sign indicates that there is statistically negative relationship between default rate and cost per loan assets with profitability. Likewise, the beta coefficient of capital adequacy ratio with ROA and ROE is found to be positive and statistically significant. The positive sign of beta coefficient indicates that there is statistically positive relationship between capital adequacy ratio and profitability. The study thus recommends an effective credit risk management for commercial banks of Nepal that maintains an optimum level of capital adequacy ratio, controls and monitors cost per loan assets and balances default rate to enhance financial performance.

CREDIT RISK MACREDIT RISK MANAGEMENT PRACTICES AND FINANCIAL PERFORMANCE: A COMPARISON BETWEEN LICENSED COMMERCIAL BANKS AND LICENSED

The stability of the financial performance of financial intermediaries is one of the key determinants of the sustainable development of any country in the current world. Licensed Commercial Banks (LCB) and Licensed Finance Companies (LFC) are the main financial intermediaries in Sri Lanka. Lending is one of the primary incomegenerating activities in financial intermediaries. The credit risk arises due to the failure of borrowers to repay the loans or meet their contractual obligations. Among different types of risks facing LCB and LFC, credit risk is considered a significant determinant of financial performance. Even though numerous prior studies were conducted to examine the impact of credit risk management on the financial performance of LCB and LFC individually, there were very rare studies available that compared the impact of credit risk management practices on the financial performance of LCB and the LFC in Sri Lanka in parallel. Hence, the study aims to fill this empirical gap by investigating the impact of credit risk management on the financial performance of LCB and LFC. Further, the study investigated the level of credit risk management practices of Sri Lankan LCB sector and LFC sector by employing the CAMEL rating method. The sample comprises 15 LCBs and 34 LFCs and the examined period is from 2014 to 2019. The panel regression model to estimate the model. Data was collected through published annual reports. Descriptive analysis, Correlation, and Regression analysis were performed using EViews Statistical software. Based on the lowest CAMEL composite ranking LFC is ranked as the best sector of credit risk management. The findings of the study revealed useful insights for investors to invest their funds more accurately and earn higher profits with low risk. Based on the regression analysis, the study concludes that asset quality and capital adequacy significantly influence the performance of both LCBs and LFCs.

Impact of Credit Risk Management on the Financial Performance of Microfinance Institutions in Nigeria: A Qualitative Review

Impact of Credit Risk Management on the Financial Performance of Microfinance Institutions in Nigeria: A Qualitative Review

The Impact of Credit Risk Management on the Financial Performance of the Banks Listed on the Dhaka Stock Exchange: A Two-Step System Generalized Method of Moments Panel Data Analysis

Prior Bangladeshi studies on the relationship between credit risk management and the financial performance of listed banks suffered from a dynamic endogeneity bias, which led to misleading conclusions. As a result, this study examines the impact of credit risk management on the financial performance of banks listed on the Dhaka Stock Exchange for the period from 2011 to 2018. The equity multiplier ratio (EMR), capital adequacy ratio (CAR), non-performing loan (NPL) ratio, interest coverage ratio (ICR), and provision for credit losses to total credit (PCLTC) are proxies for credit risk management. The study characterizes banks' financial performance from three perspectives: bank management, as indicated by return on equity (ROE); the market, as indicated by Tobin's Q (TQ); and shareholder value, as indicated by economic value added (EVA-ln). The study sample comprises 29 of the 30 listed banks, and the two-step system generalized method of moments (GMM) model is used to test the hypotheses. This study finds mixed results, i.e., none of the credit risk variables used in this study, with the exception of ICR, affect the sampled banks' performance equally from each of the three perspectives. Particularly, the results show that ICR has a significant positive impact on all measures of banks' financial performance, whereas PCLTC has no impact on any measure of financial performance. The EMR has a significant positive impact on ROE but does not affect TQ and EVA-ln. CAR has been shown to improve ROE and TQ while having an insignificant effect on EVA-ln. The NPL ratio has a negative effect on ROE but does not affect TQ and EVA-ln.

The Impact of Credit Risk Management on the Moroccan Commercial Banking Sector

The study aimed to analyze the credit risk management practices that the commercial banking sector in Morocco is committed to and their impact on the banking sector.Accordingly, the study reached many conclusions about the importance of applying the mechanism of transferring risks into credit opportunities in the market, which can be achieved through diversifying the bank’s revenue schemes in an optimal manner and correct compatibility with market requirements, which allows the bank to use different sources of interest and fees granted from other areas of service that provided by the Bank, rather than focusing primarily on loan portfolios. In addition, the study highlighted the importance of the relevant specialist within the Bank to deal with more macroeconomic research. Designed for market-based economies, other than adopting credit trend analysis alone, therefore, depreciation of bank assets comes from a variety of market drivers, which have a fundamental role in influencing the credit capabilities of the bank.

Pengaruh Credit Risk Management Pada Financial Performance Bank Konvensional Yang Terdaftar di BEI

The purpose of this study is to analyze the impact of credit risk management on the financial performance of Indonesian conventional banks in 2016-2020. The sample in this study was 32 conventional banks from 160 observations using purposive sampling technique and secondary data. The dependent variable in this paper is measured by profitability using the return on assets proxy while credit risk management as an independent variable. From the research results, LDR and NPLR have no effect on financial performance. CAR has a positive influence on financial performance so that bank managers are expected to be able to maintain their capital adequacy ratio in accordance with the provisions set by Bank Indonesia to maintain their financial performance because a high capital adequacy ratio is considered safe and tends to meet its financial obligations, while CIR and LDR negative effect on financial performance. By increasing the ratio of costs to income indicates a low level of efficiency in banking operational costs, and low liquid assets will increase cash reserves to reduce liquidity risk. Investors can invest their funds in banks that have a high capital adequacy ratio, cost of income ratio and liquidity ratio to avoid financial risk.

Credit Risk Management and Deposit Money Banks Stability in Nigeria: Does Good Corporate Governance Matter?

The study examined the impact of credit risk management on deposit money banks stability and the moderating role of corporate governance. The study period spanned 11 years (2009-2019) and twelve (12) deposit money banks were taken as sample for the study. Annual data from sampled banks were subjected to various statistical and empirical tests. The pooled model, random effect (REM) and fixed effect model (FEM) techniques of the panel least square was adopted for empirical testing while statistical testing was done using the descriptive statistics, unit root tests and co-integration tests. Credit risk management was measured using data on non-performing loans (NPL), liquid ratio (LQR), capital adequacy ratio (CAR) and loan loss provisioning (LLP) while bank size (BS) was introduced as a control variable. Corporate governance was measured using data on audit committee independence (ACI). Banks stability was measured using the Z-score of sampled banks. Empirical result indicated that NPL had a negative insignificant relationship with bank stability and a positive insignificant relationship with bank stability when corporate governance was introduced. Other credit risk management variables (LQR, CAR, LLPR) were found to strengthen banks stability although their significance were mixed. Bank size was found to be negatively related with banks stability. Premise on research findings, the study concluded that credit risk management is germane to the stability of deposit money banks in Nigeria during the period of study. It was also concluded that corporate governance although having a positive relationship with banks stability has no significant impact. Among other things, the study recommended that detailed policies and procedures for non-performing loans exposure, management and recovery are in place so as to reduce the incidence of non-performing loans. Keywords: Credit Risk, Bank Stability, Corporate Governance, Z-Score. DOI: 10.7176/RJFA/12-16-01 Publication date: August 31 st 2021

The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

The main purpose of this study is to measure up to what extent the independent factors defined by capital adequacy ratio, non-performing loans ratio, cost-income ratio, liquidity ratio, and loans-to-deposits ratio impact the financial performance of sixteen commercial banks operating in the United Arab Emirates using panel data for the period of 2013-2019. The secondary data was collected from banks and examined by applying standard descriptive statistics and the random effect model for hypothesis testing. It is concluded from the regression outcomes that non-performing loans ratio and cost-income ratio have a significant negative impact on commercial banks profitability in the United Arab Emirates, while capital adequacy ratio, liquidity ratio, and loans -to-deposits ratio all have a very weak positive relationship on the return on assets but they are not determinants of bank’s profitability due to the insignificant statistical impact on it. It is therefore suggested that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans’ performance and analyze thoroughly the clients’ credit history and ability to pay back their debts prior to any approval of loan applications. Furthermore, banks should continuously improve their assets utilization, liquidity, and techniques of managing operating costs, improve the impact of capital adequacy, and the use of deposits for lending activities from a weak positive impact to a significant positive impact on their profitability. The researchers recommend that future studies on credit risk management influence on banks’ financial performance should consider more independent variables and longer periods of study such as twenty or thirty years to have more accuracy and generalized results.

Impact of Credit Risk Management on the Performance of Islamic and Commercial Banks in Saudi Arabia

Impact of Credit Risk Management on the Performance of Islamic and Commercial Banks in Saudi Arabia

An Assessment of the Impact of Credit Risk Management and Performance on Loan Portfolio at International Bank Liberia

This research entitled “An Assessment of the impact of credit risk management and performance on loan portfolio at International Bank Liberia Limited from 2015-2017 contributed to the body of knowledge to the beneficiaries. It findings are also important for the Central Bank to use in monitoring credit scoring and history across all commercial bank with in the country. This study was quantitative in nature, and involves mathematical modelling in order to determine the effect of changes in interest rates on profit and net worth of the sampled banks. This study uses panel data and assumes that the effect of interest rate changes vary across the observations and over time, therefore the use of stochastic econometric (panel regression analysis) process is appropriate. The population of the study will consist of 150 credit staffs and other staffs of IBLL. The study adopt a census study and collect data for two years from 1st January, 2015 to 31st December, 2017 and the researcher used sample out 85 respondents representing 57% as the sample size from the population of 150 persons from the study area. The findings reveals that it was established from the study that 25% of the respondents who were picked from the institution agreed that credit score is one of the major system used by the bank in determining loan and 32% selected credit history. It was also observed that that bank operate within a defined credit granting criteria. The findings also show that IBLL established a system of independent, ongoing assessment of the bank‟s credit risk management. It was proven that 48% of the respondents agree while 41% strongly agree. It was established that IBLL have a loan risk management policy in place. This policy is very crucial in providing guidelines on how to manage the various risks the bank encounter in their lending activities. Members of the bank and regulators are those responsible for the formulation of the credit policy with less input from employees.