Non-performing loans and macroeconomic variables in Malaysia: recent evidence
Financial institutions like commercial banks play important role in the financial system by helping countries to grow and provide capital and platform for investors. However, banks need to be able to generate income in their lending business and perform efficiently. Nonperforming loans (NPLs) is o...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Fakulti Ekonomi dan Pengurusan, Universiti Putra Malaysia
2021
|
| Online Access: | http://psasir.upm.edu.my/id/eprint/94374/1/Non-performing%20loans%20and%20macroeconomic%20variables%20in%20Malaysia.pdf |
| _version_ | 1825937451438309376 |
|---|---|
| author | Kepli, Syazwani Bani, Yasmin Rosland, Anitha Laila, Nisful |
| author_facet | Kepli, Syazwani Bani, Yasmin Rosland, Anitha Laila, Nisful |
| author_sort | Kepli, Syazwani |
| collection | UPM |
| description | Financial institutions like commercial banks play important role in the financial system by
helping countries to grow and provide capital and platform for investors. However, banks
need to be able to generate income in their lending business and perform efficiently. Nonperforming loans (NPLs) is one of the tools to determine the efficiency of lending
institutions in which reflect the quality of the credit portfolio as well as the health of the
banking sector. High levels of NPLs in the banking system places the banks in risky situation
which may lead to limited financial activities and consequently lower investment and
growth. Motivated by this scenario, this study examines the determinants of NPLs in the
Malaysian banking system. Using annual data from 1988 to 2018, the study estimates the
short and long-run dynamics of several determinants using the Auto-Regressive Distribution
Lag (ARDL) cointegration approach. The empirical results demonstrate mixed results. In
the long-run, exchange rate is positive and significantly related to non-performing loans,
while industrial production and money supply are negative and significant. However,
inflation does not have significant effect on NPLs in Malaysia. The findings of this study is
useful in assisting the banking institutions and policy makers to design macro and fiscal
policies. |
| first_indexed | 2024-03-06T10:59:42Z |
| format | Article |
| id | upm.eprints-94374 |
| institution | Universiti Putra Malaysia |
| language | English |
| last_indexed | 2024-03-06T10:59:42Z |
| publishDate | 2021 |
| publisher | Fakulti Ekonomi dan Pengurusan, Universiti Putra Malaysia |
| record_format | dspace |
| spelling | upm.eprints-943742023-04-04T04:26:25Z http://psasir.upm.edu.my/id/eprint/94374/ Non-performing loans and macroeconomic variables in Malaysia: recent evidence Kepli, Syazwani Bani, Yasmin Rosland, Anitha Laila, Nisful Financial institutions like commercial banks play important role in the financial system by helping countries to grow and provide capital and platform for investors. However, banks need to be able to generate income in their lending business and perform efficiently. Nonperforming loans (NPLs) is one of the tools to determine the efficiency of lending institutions in which reflect the quality of the credit portfolio as well as the health of the banking sector. High levels of NPLs in the banking system places the banks in risky situation which may lead to limited financial activities and consequently lower investment and growth. Motivated by this scenario, this study examines the determinants of NPLs in the Malaysian banking system. Using annual data from 1988 to 2018, the study estimates the short and long-run dynamics of several determinants using the Auto-Regressive Distribution Lag (ARDL) cointegration approach. The empirical results demonstrate mixed results. In the long-run, exchange rate is positive and significantly related to non-performing loans, while industrial production and money supply are negative and significant. However, inflation does not have significant effect on NPLs in Malaysia. The findings of this study is useful in assisting the banking institutions and policy makers to design macro and fiscal policies. Fakulti Ekonomi dan Pengurusan, Universiti Putra Malaysia 2021-04 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/94374/1/Non-performing%20loans%20and%20macroeconomic%20variables%20in%20Malaysia.pdf Kepli, Syazwani and Bani, Yasmin and Rosland, Anitha and Laila, Nisful (2021) Non-performing loans and macroeconomic variables in Malaysia: recent evidence. International Journal of Economics and Management, 15 (1). 19 - 31. ISSN 1823-836X; ESSN: 2600-9390 http://www.ijem.upm.edu.my/vol15no1/2.%20Non-Performing%20Loans.pdf |
| spellingShingle | Kepli, Syazwani Bani, Yasmin Rosland, Anitha Laila, Nisful Non-performing loans and macroeconomic variables in Malaysia: recent evidence |
| title | Non-performing loans and macroeconomic variables in Malaysia: recent evidence |
| title_full | Non-performing loans and macroeconomic variables in Malaysia: recent evidence |
| title_fullStr | Non-performing loans and macroeconomic variables in Malaysia: recent evidence |
| title_full_unstemmed | Non-performing loans and macroeconomic variables in Malaysia: recent evidence |
| title_short | Non-performing loans and macroeconomic variables in Malaysia: recent evidence |
| title_sort | non performing loans and macroeconomic variables in malaysia recent evidence |
| url | http://psasir.upm.edu.my/id/eprint/94374/1/Non-performing%20loans%20and%20macroeconomic%20variables%20in%20Malaysia.pdf |
| work_keys_str_mv | AT keplisyazwani nonperformingloansandmacroeconomicvariablesinmalaysiarecentevidence AT baniyasmin nonperformingloansandmacroeconomicvariablesinmalaysiarecentevidence AT roslandanitha nonperformingloansandmacroeconomicvariablesinmalaysiarecentevidence AT lailanisful nonperformingloansandmacroeconomicvariablesinmalaysiarecentevidence |