How do funding diversity and non-performing loans affect bank performance in different economic cycles?
AbstractThis paper aims to study the impacts of bank funding diversity, non-performing loans (NPLs), and business cycles on bank performance. We employ Fixed Effect Models and the two-step system Generalized Method of Moments to examine a sample of 37 Vietnamese banks from 2005 to 2020. Our findings...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2023-12-01
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| Series: | Cogent Business & Management |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23311975.2023.2215076 |
| _version_ | 1797265276419440640 |
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| author | Khoa Dang Duong Phuong Mai Duong Tran Phung Y Ngoc Nguyen Ha Pham |
| author_facet | Khoa Dang Duong Phuong Mai Duong Tran Phung Y Ngoc Nguyen Ha Pham |
| author_sort | Khoa Dang Duong |
| collection | DOAJ |
| description | AbstractThis paper aims to study the impacts of bank funding diversity, non-performing loans (NPLs), and business cycles on bank performance. We employ Fixed Effect Models and the two-step system Generalized Method of Moments to examine a sample of 37 Vietnamese banks from 2005 to 2020. Our findings report that a one percentage point increase in the funding diversity index empowers ROA by 0.031 percentage points. Our results indicate that one positive standard deviation of real GDP from the trend calculated by the Hodrick-Prescott filter increases the ROA by 0.004 percentage points. However, a percentage point increase in non-performing loans reduces ROA by 0.075 percentage points. Our findings are also robust in various proxies of bank performance, economic cycles, and FED interest rate cycles. The findings help determine the optimal funding strategy for policymakers and bank managers. These findings suggest that bank managers develop long-term credit policies to control NPLs, improving sustainable performance. Regulators closely monitor macroeconomic factors to maintain banking stability in different economic stages. Our findings align with the diversification theory, trade-off theory, and prior literature. |
| first_indexed | 2024-03-07T14:19:41Z |
| format | Article |
| id | doaj.art-bce94c9b49a1406a9b7d43970441916b |
| institution | Directory Open Access Journal |
| issn | 2331-1975 |
| language | English |
| last_indexed | 2024-04-25T00:42:13Z |
| publishDate | 2023-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Business & Management |
| spelling | doaj.art-bce94c9b49a1406a9b7d43970441916b2024-03-12T08:30:27ZengTaylor & Francis GroupCogent Business & Management2331-19752023-12-0110210.1080/23311975.2023.2215076How do funding diversity and non-performing loans affect bank performance in different economic cycles?Khoa Dang Duong0Phuong Mai Duong Tran1Phung Y Ngoc Nguyen2Ha Pham3Faculty of Finance and Banking, Ton Duc Thang University, Ho Chi Minh City, VietnamFaculty of Finance and Banking, Ton Duc Thang University, Ho Chi Minh City, VietnamFaculty of Finance and Banking, Ton Duc Thang University, Ho Chi Minh City, VietnamFaculty of Finance and Banking, Ho Chi Minh City Open University, Ho Chi Minh City, VietnamAbstractThis paper aims to study the impacts of bank funding diversity, non-performing loans (NPLs), and business cycles on bank performance. We employ Fixed Effect Models and the two-step system Generalized Method of Moments to examine a sample of 37 Vietnamese banks from 2005 to 2020. Our findings report that a one percentage point increase in the funding diversity index empowers ROA by 0.031 percentage points. Our results indicate that one positive standard deviation of real GDP from the trend calculated by the Hodrick-Prescott filter increases the ROA by 0.004 percentage points. However, a percentage point increase in non-performing loans reduces ROA by 0.075 percentage points. Our findings are also robust in various proxies of bank performance, economic cycles, and FED interest rate cycles. The findings help determine the optimal funding strategy for policymakers and bank managers. These findings suggest that bank managers develop long-term credit policies to control NPLs, improving sustainable performance. Regulators closely monitor macroeconomic factors to maintain banking stability in different economic stages. Our findings align with the diversification theory, trade-off theory, and prior literature.https://www.tandfonline.com/doi/10.1080/23311975.2023.2215076Funding diversitynon-performing loanseconomic cyclesbank performanceuptrenddowntrend |
| spellingShingle | Khoa Dang Duong Phuong Mai Duong Tran Phung Y Ngoc Nguyen Ha Pham How do funding diversity and non-performing loans affect bank performance in different economic cycles? Cogent Business & Management Funding diversity non-performing loans economic cycles bank performance uptrend downtrend |
| title | How do funding diversity and non-performing loans affect bank performance in different economic cycles? |
| title_full | How do funding diversity and non-performing loans affect bank performance in different economic cycles? |
| title_fullStr | How do funding diversity and non-performing loans affect bank performance in different economic cycles? |
| title_full_unstemmed | How do funding diversity and non-performing loans affect bank performance in different economic cycles? |
| title_short | How do funding diversity and non-performing loans affect bank performance in different economic cycles? |
| title_sort | how do funding diversity and non performing loans affect bank performance in different economic cycles |
| topic | Funding diversity non-performing loans economic cycles bank performance uptrend downtrend |
| url | https://www.tandfonline.com/doi/10.1080/23311975.2023.2215076 |
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