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Commercial Bank Performance and Loan Delinquency

13 Pages Posted: 28 Jun 2013 Last revised: 2 May 2014

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: June 27, 2013

Abstract

This study examines the reaction of commercial bank sector to loan (written by all commercial banks) delinquency rate shock. Using quarterly data from 1985Q1 to 2012Q4, the results show that returns on the commercial bank sector significantly drop immediately following the spike in loan delinquency rate. Loan delinquency rate Granger-causes the negative reaction of returns on the commercial bank sector. Loan delinquency rate contributes about 3.46%, 6.42%, 8.10% and 9.00% of the return forecast error at the two-, four-, six- and eight-quarter horizons, respectively.

Keywords: loan delinquency, commercial banks, financial sector performance

JEL Classification: G14, G20, G21

Suggested Citation

Sum, Vichet, Commercial Bank Performance and Loan Delinquency (June 27, 2013). Available at SSRN: https://ssrn.com/abstract=2286040 or http://dx.doi.org/10.2139/ssrn.2286040

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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