FACTORS INFLUENCING NON-PERFORMING LOANS: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN MALAYSIA

Year 2021, , 160 - 166, 30.09.2021

Mugahed Mahyoub Rasidah Mohd Saıd

https://doi.org/10.17261/Pressacademia.2021.1448

Abstract

Purpose- The purpose of this research is to examine the factors influencing non-performing loans (NPLs) ratio for Malaysian commercial banks
from the period 2010 to 2018.
Methodology- Bank-specific factors and macroeconomic factors were included in the analysis. Using panel data of fifteen commercial banks in
Malaysia.
Findings- The finding reveals that capital adequacy ratio is a significant factor in influencing the sample banks’ level of non-performing loans. All
other bank-specific factors employed in the analysis were found to be insignificant. In addition, based on the results provided by real gross
domestic products and inflation, we can conclude that economic situation does not impact the non-performing loans level of the sample
commercial banks.
Conclusion- It has been concluded that the loan quality of the sample bank is questionable. In order to ensure an effective operating and high
performance of banks, banks require a deep concentration on their loan quality that would not only generate income, but also minimize negative
and ineffective outcome to the banks. In addition, this study can be valuable to supervisory authorities, governments, and the banking industries
in forecasting non-performing loans as this study shows the determinants that shape the level of Non-performing loans.

Keywords

Bank-specific factors, macroeconomic, panel data analysis, non-performing loans, Malaysian Commercial Banks

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