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A comparative study of performance of commercial banks in ASIAN developing and developed countries

Author

Listed:
  • Asima Siddique

    (COMSATS University Islamabad, Pakistan)

  • Omar Masood

    (University of Lahore, Pakistan)

  • Kiran Javaria

    (University of Lahore, Pakistan)

  • Dinh Tran Ngoc Huy

    (International University of Japan, Japan)

Abstract

The main focus of this study is to investigate the impact of non-performing loans (NPLs) and other bank specific factors on the financial performance of commercial banks in Asian developing and developed countries due to an alarmingly high ratio of non-performing loans.The bank specific factors that are used in this study are cost efficiency ratio (CER), capital adequacy ratio (CAR), size of the bank, sales growth (SG) and proxies of financial performance (FP) are return on equity (ROA) and return on asset (ROE). Secondary Panel data of ten years (2006-2015) has been used for this empirical analysis and 19 commercial banks from developing countries of Asia (Pakistan and India), while 17 commercial banks from developed countries of Asia (Japan and Saudi Arabia) are selected. Generalized method of moment is used for the coefficient estimation to overcome the effects of some endogenous variables. NPLs and CER are significantly negatively related to the financial performance (ROA and ROE) of developing and developed countries commercial banks. There is a negative relationship of bank size with most of financial performance variables. Sale growth and capital adequacy ratio has significant positive relationship both measures of financial performance (ROA and ROE) in both pools. Due to the importance of commercial banks in the overall economy of a country, there is a need for management of commercial banks and regulatory authorities to undertake policies that ensure efficiency in banking operations.

Suggested Citation

  • Asima Siddique & Omar Masood & Kiran Javaria & Dinh Tran Ngoc Huy, 2020. "A comparative study of performance of commercial banks in ASIAN developing and developed countries," Insights into Regional Development, VsI Entrepreneurship and Sustainability Center, vol. 2(2), pages 580-591, June.
    • Handle: RePEc:ssi:jouird:v:2:y:2020:i:2:p:580-591
    DOI: 10.9770/ird.2020.2.2(6)
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    References listed on IDEAS

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    Cited by:

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    3. Kalamkas Rakhimzhanova & Serik Makysh & Botagoz Saparova & Baurzhan Iskakov, 2020. "Problem loan management in the countries of the Eurasian Economic Union," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(4), pages 3286-3308, June.
    4. Enni Savitri & Andreas Andreas & Almasdi Syahza & Tatang Ary Gumanti & Nik Herda Nik Abdullah, 2020. "Corporate governance mechanism and financial performance: role of earnings management," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(4), pages 3395-3409, June.
    5. Svetlana Drobyazko & Anna Barwinska-Malajowicz & Boguslaw Slusarczyk & Olga Chubukova & Taliat Bielialov, 2020. "Risk Management in the System of Financial Stability of the Service Enterprise," JRFM, MDPI, vol. 13(12), pages 1-15, November.
    6. Sulaeman Rahman Nidar & Mokhamad Anwar & Ratna Komara & Layyinaturrobaniyah Layyinaturrobaniyah, 2020. "Determinant of regional development bank efficiency for their sustainability issues," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(1), pages 1133-1145, September.

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    More about this item

    Keywords

    non-performing loans; micro economic variables; Pakistan & India; Japan & Saudi Arabia; GMM approach;
    All these keywords.

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • D00 - Microeconomics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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