The Consequences of Bank Loan Growth: Evidence from Asia

49 Pages Posted: 25 Jan 2016 Last revised: 24 May 2017

Date Written: May 24, 2017

Abstract

How much of non-performing loans can be explained by loan growth? If an increase in loan growth leads to higher profitability but does not necessarily cause non-performing loans to increase in the short run, banks with (managerial) short-termism will be ex ante incentivized to grant more loans to increase short-run profitability. Using a sample of publicly listed banks in 18 countries in Asia during the period 1990–2014, I show that in the short run, loan growth has a positive effect on profitability and a negative effect on non-performing loans. Overall, I provide comprehensive empirical evidence for the relationships between loan growth, profitability, and non-performing loans for publicly listed banks in Asia.

Keywords: Asia, financial crisis, loan growth, non-performing loans, profitability

JEL Classification: F4, F5, G1, G2, G3

Suggested Citation

Vithessonthi, Chaiporn, The Consequences of Bank Loan Growth: Evidence from Asia (May 24, 2017). Available at SSRN: https://ssrn.com/abstract=2721189 or http://dx.doi.org/10.2139/ssrn.2721189

Chaiporn Vithessonthi (Contact Author)

Sunway University ( email )

No. 5, Jalan Universiti
Bandar Sunway, Selangor Darul Ehsan 47500
Malaysia
+60 3 7491 8622 (Phone)
+60 3 5635 8633 (Fax)

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