The impact of credit risk and macroeconomic factors on profitability: The case of the ASEAN banks
College
Ramon V. Del Rosario College of Business
Department/Unit
Economics
Document Type
Article
Source Title
Banks and Bank Systems
Volume
15
Issue
1
First Page
21
Last Page
29
Publication Date
1-1-2020
Abstract
This study investigates the effect of credit risk and macroeconomic factors on profitability of 20 ASEAN banks, particularly from Indonesia, Malaysia, Thailand and Philippines, covering the period of 2012 to 2017. The unbalanced panel data were tested for heteroscedasticity and normality. A fixed effects model and a random effects model were utilized followed by simple ordinary least squares (OLS) regression. The obtained results show that credit risk and GDP growth negatively affect Return on Equity (ROE) at 5% level of significance. The inflation rate increases ROE by 0.323%. In terms of influence, inflation has the highest impact on ROE followed by GDP growth and credit risk. Credit risk and GDP growth negatively affect Return on Assets (ROA) at 5% level of significance. ROA was also influenced by an increase in inflation rate. Therefore, this study will help banks and bank managers, depositors, investors, policy makers and governments to identify factors affecting bank profitability. © Myra V. De Leon, 2020
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Digitial Object Identifier (DOI)
10.21511/bbs.15(1).2020.03
Recommended Citation
de Leon, M. V. (2020). The impact of credit risk and macroeconomic factors on profitability: The case of the ASEAN banks. Banks and Bank Systems, 15 (1), 21-29. https://doi.org/10.21511/bbs.15(1).2020.03
Disciplines
Economics
Keywords
Credit—Southeast Asia--Management; Banks and banking—Southeast Asia; Gross domestic product—Southeast Asia; Inflation (Finance)—Southeast Asia
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