Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital

The banks in Pakistan have failed to manage the quality of their assets as exposed by the upsurge in their non-performing loans (NPL) experiences as compared with the rest of the World. The high credit risk of the banking sector may reduce its profitability, affects the quality of its assets and inc...

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Main Author:	Nawaz, Muhammad
Format:	Thesis
Language:	eng eng
Published:	2021
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/9420/1/s901869_01.pdf https://etd.uum.edu.my/9420/2/s901869_02.pdf
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id	my-uum-etd.9420
record_format	uketd_dc
spelling	my-uum-etd.94202022-05-29T10:01:43Z Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital 2021 Nawaz, Muhammad Mat Nor, Alias Tolos, Habibah Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance The banks in Pakistan have failed to manage the quality of their assets as exposed by the upsurge in their non-performing loans (NPL) experiences as compared with the rest of the World. The high credit risk of the banking sector may reduce its profitability, affects the quality of its assets and increase loan losses which may eventually lead to severe financial distress. Accordingly, the objective of this study is to determine the relationship between external factors such as gross domestic products (GDP), inflation (IR), lending interest rate (LR), unemployment (UN), political stability index (PS) and corruption control index (CCI) and internal factors, namely operational efficiency (OE), liquidity (LIQ), loan growth (LGR) and profitability (ROA) with credit risk (CR) of the conventional and Islamic banks in Pakistan. The novelty of this study is the investigation of the moderating effect of intellectual capital which has previously been given less attention as credit risk determinant in the banking sector of Pakistan. Secondary data of 20 Conventional banks and 4 Islamic banks for the period 2006-2017 was utilized. The quantitative method with multiple and hierarchical regression technique was utilized for unbalanced panel data analysis. The study found that external and internal factors, namely GDP, LR, UN, PS, CCI, LIQ and LGR have significant impacts on the Credit Risk of Conventional banks in Pakistan. Meanwhile, LR, PS, CCI and ROA have significant impacts on the Credit Risk of Islamic banks in Pakistan. The hierarchical multiple regression showed that Intellectual Capital moderates the impact of the relationship between OE, LIQ, LGR and ROA and the Credit Risk of Conventional banks in Pakistan. However, for Islamic banks only the relationship of ROA and LGR between bank’s Credit Risk is moderated by Intellectual Capital. It is recommended that the State Bank of Pakistan would continuously monitor the development of Intellectual Capital through continuous training and excellent internal control system of the listed banks to protect the public funds. The findings of this study can also be applied to formulate fresh recovery and restructuring policies that can serve as a separate strategy between Islamic banks and Conventional banks in Pakistan. 2021 Thesis https://etd.uum.edu.my/9420/ https://etd.uum.edu.my/9420/1/s901869_01.pdf text eng 2024-03-01 staffonly https://etd.uum.edu.my/9420/2/s901869_02.pdf text eng public other doctoral Universiti Utara Malaysia
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Mat Nor, Alias Tolos, Habibah
topic	HG Finance
spellingShingle	HG Finance Nawaz, Muhammad Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital
description	The banks in Pakistan have failed to manage the quality of their assets as exposed by the upsurge in their non-performing loans (NPL) experiences as compared with the rest of the World. The high credit risk of the banking sector may reduce its profitability, affects the quality of its assets and increase loan losses which may eventually lead to severe financial distress. Accordingly, the objective of this study is to determine the relationship between external factors such as gross domestic products (GDP), inflation (IR), lending interest rate (LR), unemployment (UN), political stability index (PS) and corruption control index (CCI) and internal factors, namely operational efficiency (OE), liquidity (LIQ), loan growth (LGR) and profitability (ROA) with credit risk (CR) of the conventional and Islamic banks in Pakistan. The novelty of this study is the investigation of the moderating effect of intellectual capital which has previously been given less attention as credit risk determinant in the banking sector of Pakistan. Secondary data of 20 Conventional banks and 4 Islamic banks for the period 2006-2017 was utilized. The quantitative method with multiple and hierarchical regression technique was utilized for unbalanced panel data analysis. The study found that external and internal factors, namely GDP, LR, UN, PS, CCI, LIQ and LGR have significant impacts on the Credit Risk of Conventional banks in Pakistan. Meanwhile, LR, PS, CCI and ROA have significant impacts on the Credit Risk of Islamic banks in Pakistan. The hierarchical multiple regression showed that Intellectual Capital moderates the impact of the relationship between OE, LIQ, LGR and ROA and the Credit Risk of Conventional banks in Pakistan. However, for Islamic banks only the relationship of ROA and LGR between bank’s Credit Risk is moderated by Intellectual Capital. It is recommended that the State Bank of Pakistan would continuously monitor the development of Intellectual Capital through continuous training and excellent internal control system of the listed banks to protect the public funds. The findings of this study can also be applied to formulate fresh recovery and restructuring policies that can serve as a separate strategy between Islamic banks and Conventional banks in Pakistan.
format	Thesis
qualification_name	other
qualification_level	Doctorate
author	Nawaz, Muhammad
author_facet	Nawaz, Muhammad
author_sort	Nawaz, Muhammad
title	Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital
title_short	Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital
title_full	Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital
title_fullStr	Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital
title_full_unstemmed	Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital
title_sort	determinants of credit risk in pakistan banking sector and the moderating role of intellectual capital
granting_institution	Universiti Utara Malaysia
granting_department	Othman Yeop Abdullah Graduate School of Business
publishDate	2021
url	https://etd.uum.edu.my/9420/1/s901869_01.pdf https://etd.uum.edu.my/9420/2/s901869_02.pdf
_version_	1747828592944873472

Determinants of credit risk in Pakistan banking sector and the moderating role of intellectual capital

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