Abstract
The purpose of this paper is to assess the macroeconomic factors such
as GDP growth rate, exchange rate, tax rate, inflation, unemployment,
tax rate and country level institutional factors as determinants of NPLs.
Using secondary data for the period from 2006-16, panel data
techniques as well as GMM method analysis are applied to investigate
the determinants of NPLs. Results show that GDP growth rate,
exchange rate, inflation, Unemployment, Tax rate and country level
institutional factors (control of corruption, political stability,
government effectiveness, regulatory quality, voice and accountability)
affect NPLs in different ways. The paper concludes that not only
macroeconomic variables are important determinates of NPLs but that
institutional and regulatory environment also affect NPLs in reducing
its ratio. Policy implications such as stringent regulations in advancing
loans and their respective collection methods as well as monetary
policy needs to be taken into consideration before approving loans to
any lender.
Ihtesham Khan, Adnan Ahmad, Muhammad Faizan Malik, Muhammad Ilyas. (2017) Assessing Macroeconomic and Country-Level Institutional Factors as Determinants of Non-Performing Loans in Pakistani Commercial Banks , Journal of Managerial Sciences, Volume 11, Issue 4.
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