Author
Listed:
- MD. NURUL KABIR
(Department of Accounting and Finance, North South University, 15, Block B, Bashundhara, Dhaka, Bangladesh)
- MOHAMMAD DULAL MIAH
(Department of Economics and Finance, University of Nizwa, Birkat Al Mawz, P. O. Box 33, PC 616 Nizwa, Oman)
- RUBAIYA NADIA HUDA
(Department of Accounting and Finance, North South University, 15, Block B, Bashundhara, Dhaka, Bangladesh)
Abstract
The paper investigates the determinants of credit risk of Islamic and conventional banks in Bangladesh. In so doing, it collects data from 30 private commercial banks comprising of seven Islamic banks and 23 conventional banks for the period 2001–2018. Collected data are analyzed using GMM estimation technique. This method is perceived to be robust because it reduces the endogeneity problem that exists in the panel data set. Analysis of data shows that among the macro-economic variables, GDP growth decreases credit risk, whereas real interest rate and inflation increase credit risk. Bank-specific variables prove that both clusters of banks suffer from adverse selection and moral hazard problems. Results also indicate that competition has a risk-enhancing effect on banks, which supports the competition-fragility nexus. Further analysis shows that board size and board independence affect the credit risk of both clusters of banks. Findings of this study suggest some policy implications from macro, bank and governance perspectives. Specifically, banks should adopt ‘speed limit’ policy to reduce the poor quality loan. Also, competition in the banking industry should be regulated. Finally, central bank should maintain uniform capital adequacy ratio for both clusters of banks. Although this study is limited to private commercial banks in Bangladesh, the results can be generalized for other emerging economies.
Suggested Citation
Md. Nurul Kabir & Mohammad Dulal Miah & Rubaiya Nadia Huda, 2022.
"Determinants Of Credit Risk: A Comparative Analysis Between Islamic And Conventional Banks In Bangladesh,"
The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 67(01), pages 349-379, March.
Handle:
RePEc:wsi:serxxx:v:67:y:2022:i:01:n:s0217590820420011
DOI: 10.1142/S0217590820420011
Download full text from publisher
As the access to this document is restricted, you may want to search for a different version of it.
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:67:y:2022:i:01:n:s0217590820420011. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.