Article
Regulations Governance and Resolution of Non-performing Loan
Emerging Markets Finance and Trade
(2019)
Abstract
How do banks resolve a severe bad loan problem in a capital-constrained, low-income economy when a government bailout is not an option? We address this question by examining new evidence of a sharp decline in bad loan ratios in a panel of conventional commercial banks in Bangladesh. On the aggregate level, the bad loan ratio in this market has dropped from 41% in 1999 to only 10.0% in 2012. We find that at a micro-level this dramatic improvement is associated with bank management quality and internal governance that were substantially enhanced during a decade of large-scale regulatory reforms. The bank-level findings persist even after controlling for market monitoring, bank- and industry-level factors and macroeconomic variables. Both economic growth and financial development paved the way for the banks operating in this macroeconomic environment to reduce NPL over time.
Disciplines
Publication Date
2019
Citation Information
Abu Amin, Mahmood Osman Imam and Mahfuja Malik. "Regulations Governance and Resolution of Non-performing Loan" Emerging Markets Finance and Trade (2019) Available at: http://works.bepress.com/mahfuja_malik/16/