Impact of Industry-Specific and Macroeconomic Factors on Non-Performing Loans of Licensed Banks in Sri Lanka
| Autor: | N. M. M. Damayanthi, C. S. Gunawardhana |
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| Rok vydání: | 2022 |
| Předmět: | |
| Zdroj: | Kelaniya Journal of Management. 11:19-43 |
| ISSN: | 2448-9298 2279-1469 |
| DOI: | 10.4038/kjm.v11i2.7658 |
| Popis: | This study aims to examine the factors affecting to non-performing loans (NPLs) covering 30 licensed banks (LBs) in Sri Lanka. The selected variables affecting to NPLs considered as industry-specific and macroeconomic variables which can easily identify the internal and external influenced to the position of NPLs of LBs. The study covers the data from 2000 to 2019 exploring autoregressive distributed lag model and checking the robustness of the results using Vector Error Correction Model. The test results revealed that both industry-specific and macroeconomic variables significantly influenced on NPLs in LBs in Sri Lanka. Some industry-specific factors such as loan growth of LBs, net operating profits and deposit rates show the significant positive relationship with NPLs. Among the macroeconomic factors, gross domestic product and unemployment rate had a negative effect on NPLs. However, domestic credit and exchange rate included into macroeconomic variables revealed that positive relationship with NPLs in LBs. The study recommends when releasing loans to businesses including micro, small and medium scale enterprises, need more concentrate about both industry specific and macroeconomic factors due to main constraint of a LB is NPL which may increase or decrease at any time. The findings of this study may use for casting and measuring of NPLs in the future scenarios and to take decisions on all financial sector related industries in Sri Lanka. The research recommends further to maintain higher level of provisions for bad loans if high NPLs are observed in the books of accounts in LBs. |
| Databáze: | OpenAIRE |
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