Impaired Loan in Commercial Banks, a Benediction or Atrocity? An Empirical Investigation on Selected Sub-Saharan African Countries
- DOI
- 10.2991/icebef-18.2019.167How to use a DOI?
- Keywords
- banks performance; impaired loan; unimpaired loan; panel regression technique
- Abstract
This study investigates the effect of diversifying impaired and unimpaired loans on the financial performance of selected banks in SSA within the period from 2007 to 2016. Descriptive, correlation and panel regression techniques were adopted on 250 sampled banks form 30 countries. The results revealed that impaired loan ratio (ILR) has a direct and significant relationship with Return on Asset (ROA), while unimpaired loan ratio (LCR) has an inverse relationship with ROA, even though this relationship is insignificant. In addition, a restricted F-test was conducted and revealed that loan diversification has a cross-sectional uniqueness or heterogeneity effect on bank performance, while the Hausman test carried out showed that the fixed-effect model was the most efficient and consistent parameter estimate Thus, commercial banks need to revisit their loan structures both in terms and repayment modes to ensure that all loans they disburse are impaired, as this is positively and significantly related to the enhancement of their performance level. Also, banks should carry out their loan diversification practices in line with the adequate considerations of human capital training, development, and deployment, so as to ensure the attainment of the benefits of diversification on their performance.
- Copyright
- © 2019, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Odunayo Magret Olarewaju PY - 2019/05 DA - 2019/05 TI - Impaired Loan in Commercial Banks, a Benediction or Atrocity? An Empirical Investigation on Selected Sub-Saharan African Countries BT - Proceedings of the 1st International Conference on Economics, Business, Entrepreneurship, and Finance (ICEBEF 2018) PB - Atlantis Press SP - 799 EP - 804 SN - 2352-5428 UR - https://doi.org/10.2991/icebef-18.2019.167 DO - 10.2991/icebef-18.2019.167 ID - Olarewaju2019/05 ER -