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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...

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Main Authors: Kepli, Syazwani, Bani, Yasmin, Rosland, Anitha, Laila, Nisful
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
http://psasir.upm.edu.my/id/eprint/94374/
http://www.ijem.upm.edu.my/vol15no1/2.%20Non-Performing%20Loans.pdf
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spelling my.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
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
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.
format Article
author Kepli, Syazwani
Bani, Yasmin
Rosland, Anitha
Laila, Nisful
spellingShingle Kepli, Syazwani
Bani, Yasmin
Rosland, Anitha
Laila, Nisful
Non-performing loans and macroeconomic variables in Malaysia: recent evidence
author_facet Kepli, Syazwani
Bani, Yasmin
Rosland, Anitha
Laila, Nisful
author_sort Kepli, Syazwani
title Non-performing loans and macroeconomic variables in Malaysia: recent evidence
title_short 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_sort non-performing loans and macroeconomic variables in malaysia: recent evidence
publisher Fakulti Ekonomi dan Pengurusan, Universiti Putra Malaysia
publishDate 2021
url http://psasir.upm.edu.my/id/eprint/94374/1/Non-performing%20loans%20and%20macroeconomic%20variables%20in%20Malaysia.pdf
http://psasir.upm.edu.my/id/eprint/94374/
http://www.ijem.upm.edu.my/vol15no1/2.%20Non-Performing%20Loans.pdf
_version_ 1762394211649323008
score 13.211869

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