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Credit risk, bank performance and Islamic banking: a panel data evidence from Pakistan

Credit risk, bank performance and Islamic banking: a panel data evidence from Pakistan This study examines the relationship between credit risk and performance using unbalanced quarterly panel data, of six Islamic banks in Pakistan. The study uses panel data instrumental variables regression, utilising the seemingly unrelated regression (SUR) models to identify the bank specific variables that affect credit risk and performance of Islamic banks. The results show that credit risk is an endogenous determinant of bank performance. The causes of credit risk may include components of credit assets, which is dependent on bank specific factors. Besides, the results also suggest that the credit risk of bank specific variables lowers bank profitability. Therefore, the results support the views that credit risk is negatively related to bank performance in the case of banking sector in Pakistan. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Services, Economics and Management Inderscience Publishers

Credit risk, bank performance and Islamic banking: a panel data evidence from Pakistan

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd
ISSN
1753-0822
eISSN
1753-0830
DOI
10.1504/IJSEM.2018.097786
Publisher site
See Article on Publisher Site

Abstract

This study examines the relationship between credit risk and performance using unbalanced quarterly panel data, of six Islamic banks in Pakistan. The study uses panel data instrumental variables regression, utilising the seemingly unrelated regression (SUR) models to identify the bank specific variables that affect credit risk and performance of Islamic banks. The results show that credit risk is an endogenous determinant of bank performance. The causes of credit risk may include components of credit assets, which is dependent on bank specific factors. Besides, the results also suggest that the credit risk of bank specific variables lowers bank profitability. Therefore, the results support the views that credit risk is negatively related to bank performance in the case of banking sector in Pakistan.

Journal

International Journal of Services, Economics and ManagementInderscience Publishers

Published: Jan 1, 2018

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