ISSN: 2225-8329
Open access
This article shed some light on the role between bank-specific factors and loan growth in Malaysia using an unbalanced panel analysis of 80 bank-year observations obtained from Eikon Thompson Reuters. Analyzing loan growth is essential to comprehend the expansion of the money supply caused by the creation of credit through new bank loans. Employing the Pooled Ordinary Least Square (POLS) method, the key finding of this study revealed that the capital adequacy ratio had a detrimental impact on the growth of loans at Malaysian commercial banks. Denoting that credit growth and non-performing loans fluctuate over time, particularly before the start of the financial crisis, we discovered a positive correlation between NPL on loan growth. The size of the bank also has a significant impact on how Malaysian commercial banks behave when it comes to lending. The procyclical nature of Asian banks' non-discretionary loan loss reserves is demonstrated by the negative association between credit risk and lending growth. As we reported opposing effects of NPL and GDP on loan growth, thus further study is needed to confirm these conditions.
Abdul Adzis, A., Sheng, L. E., & Abu Bakar, J. (2018). Bank lending determinants: Evidence from Malaysia commercial banks. Journal of Banking and Finance Management, 1(3), 36-48.
Abdul Karim, M., Hassan, M. K., Hassan, T., & Mohamad, S. (2014). Capital adequacy and lending and deposit behaviors of conventional and Islamic banks. Pacific-Basin Finance Journal, 28, 58–75. https://doi.org/10.1016/j.pacfin.2013.11.002
Affandi, S., Ja’afar, A. I., Ismail, F., & Abdul Shukur, N. (2021). Bank Lending Behavior: Evidence From Malaysian Dual Banking System. Advanced International Journal of Banking, Accounting and Finance, 3(8), 65–75. https://doi.org/10.35631/aijbaf.38006
Apergis, N., & Christou, C. (2015). The behavior of the bank lending channel when interest rates approach the zero lower bound: Evidence from quantile regressions. Economic Modelling, 49, 296-307.
Berger, A. N., & Udell, G. F. (1994). Did risk-based capital allocate bank credit and cause a" credit crunch" in the United States?. Journal of Money, credit and Banking, 26(3), 585-628.
Berger, A. N., & Bouwman, C. H. (2013). How does capital affect bank performance during financial crises?. Journal of financial economics, 109(1), 146-176.
Bridges, J., Gregory, D., Nielsen, M., Pezzini, S., Radia, A., & Spaltro, M. (2014). The impact of capital requirements on bank lending.
Bellotti, A., Brigo, D., Gambetti, P., & Vrins, F. (2021). Forecasting recovery rates on non-performing loans with machine learning. International Journal of Forecasting, 37(1), 428–444. https://doi.org/10.1016/j.ijforecast.2020.06.009
Brasli?š, ?., Orlovs, A., Braukša, I., & Bulis, A. (2021). Gdp and Lending Behaviour: Empirical Evidence for Baltic States Economies. Regional Formation and Development Studies, 10(2), 31–45. https://doi.org/10.15181/rfds.v10i2.139
CEIC Data. (2022). Malaysia Total Loans Growth. CEIC
https://www.ceicdata.com/en/indicator/malaysia/total-loans-growth
Cornett, M. M., McNutt, J. J., Strahan, P. E., & Tehranian, H. (2011). Liquidity risk management and credit supply in the financial crisis. Journal of financial economics, 101(2), 297-312.
Cubillas, E., & Suárez, N. (2018). Bank market power and lending during the global financial crisis. Journal of International Money and Finance, 89, 1-22.
Dang, V. (2019). The effects of loan growth on bank performance: Evidence from Vietnam. Management Science Letters, 9(6), 899-910.
Diamond, D. W., & Rajan, R. G. (2000). A theory of bank capital. the Journal of Finance, 55(6), 2431-2465.
Favara, M. G. (2003). An empirical reassessment of the relationship between finance and growth. International Monetary Fund.
Gambacorta, L., & Mistrulli, P. E. (2004). Does bank capital affect lending behavior?. Journal of Financial intermediation, 13(4), 436-457.
Hossain, M. S., Latiff, A. R. A., & Osman, M. N. H. B. (2022). Money creation and commercial banks’ money lending activity through the accounting treatment: stakeholders’ perceptions in Malaysia. Qualitative Research in Financial Markets.
Ivashina, V., & Scharfstein, D. (2010). Bank lending during the financial crisis of 2008. Journal of Financial Economics, 97(3), 319-338.
Khalid, S. (2022, June 8). RAM Ratings sees 2022 loan growth at 4.5%-5% despite rising interest rates. The Edge Markets. https://www.theedgemarkets.com/article/ram-ratings-sees-2022-loan-growth-455-despite-rising-interest-rates
Kim, D., & Sohn, W. (2017). The effect of bank capital on lending: Does liquidity matter? Journal of Banking and Finance, 77, 95–107.
https://doi.org/10.1016/j.jbankfin.2017.01.011
Kosak, M., Li, S., Loncarski, I., & Marinc, M. (2015). Quality of bank capital and bank lending behavior during the global financial crisis. International review of financial analysis, 37, 168-183.
Levine, R., Loayza, N., & Beck, T. (2000). Financial intermediation and growth: Causality and causes. Journal of Monetary Economics, 46(1), 31-77.
Mishra, P., Montiel, P., Pedroni, P., & Spilimbergo, A. (2014). Monetary policy and bank lending rates in low-income countries: Heterogeneous panel estimates. Journal of Development Economics, 111, 117-131.
Nguyen, D. D., Nguyen, L., & Sila, V. (2019). Does corporate culture affect bank risk?taking? Evidence from loan?level data. British Journal of Management, 30(1), 106-133.
Qian, J., Strahan, P. E., & Yang, Z. (2015). The impact of incentives and communication costs on information production and use: Evidence from bank lending. The Journal of Finance, 70(4), 1457-1493.
Riadi, S. (2018). The effect of Third Parties Fund, Non-Performing Loan, Capital Adequacy Ratio, Loan to Deposit Ratio, Return On Assets, Net Interest Margin and Operating Expenses Operating Income on Lending (Study in Regional Development Banks in Indonesia). Proceedings of the International Conference on Industrial Engineering and Operations Management, 2018-March, 1015–1026.
Serrano, S. A. (2021). The impact of non-performing loans on bank lending in Europe: An empirical analysis. North American Journal of Economics and Finance, 55(October 2020). https://doi.org/10.1016/j.najef.2020.101312
Soedarmono, W., Tarazi, A., Agusman, A., Monroe, G. S., & Gasbarro, D. (2017). Loan Loss Provisions and Bank Lending Behavior: Do Information Sharing and Borrowers Legal Rights Matter? SSRN Electronic Journal, 1–42. https://doi.org/10.2139/ssrn.2782707
Tecles, P. L., & Tabak, B. M. (2008). Estimating the credit–GDP elasticity: the case of Brazil. The Banco Central do Brasil Working, (229).
Thakor, A. V. (1996). Capital requirements, monetary policy, and aggregate bank lending: theory and empirical evidence. The Journal of Finance, 51(1), 279-324.
Tolo, E., & Viren, M. (2021). How much do non-performing loans hinder loan growth in Europe?. European Economic Review, 136, 103773.
Vithessonthi, C. (2016). Deflation, bank credit growth, and non-performing loans: Evidence from Japan. International Review of Financial Analysis, 45, 295–305. https://doi.org/10.1016/j.irfa.2016.04.003
Vo, X. V. (2018). Bank lending behavior in emerging markets. Finance Research Letters, 27(January), 129–134. https://doi.org/10.1016/j.frl.2018.02.011
Zelenyuk, N., Faff, R. W., & Pathan, S. (2017). Voluntary Disclosure of Capital Adequacy and Bank Lending. Available at SSRN 2988423.
In-Text Citation: (Affandi et al., 2022)
To Cite this Article: Affandi, S., Abdul Shukur, N., Asari, F. F. A. H., & Masod, A. F. (2022). Do Internal Bank Factors or Macroeconomic Indices Hinder Loan Growth in Malaysian Commercial Banks? International Journal of Academic Research in Accounting Finance and Management Sciences. 12(2), 560 – 572.
Copyright: © 2022 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode