single-jc.php

JACIII Vol.21 No.6 pp. 1087-1093
doi: 10.20965/jaciii.2017.p1087
(2017)

Paper:

Analysis of Influence Factors of Non-Performing Loans and Path Based on the Dynamic Control Theory

Zhenlei Wang*,† and Song Qin**,***

*Hangzhou Dianzi University
No.9-319, 2nd Street, Jianggan, Hangzhou, Zhejiang 310018, China

Corresponding author

**Taizhou University, Taizhou 318000, China

***Huazhou University of Science and Technology, Wuhan 430074, China

Received:
December 27, 2016
Accepted:
May 2, 2017
Published:
October 20, 2017
Keywords:
dynamic control theory, non-performing loans, hamilton function
Abstract

The balance of non-performing loans (NPLs) of Chinese banking financial institutions rebounded for the first time after 2005, and credit risk has emerged as one of the rapidly rising risks in today’s financial markets. In this study, we focus on the NPLs of financial institutions. In particular, the factors affecting their rate are studied. A dynamic control theory model is used to set up a Hamilton function for describing the effect of these factors. Moreover, the path of NPLs under the influence of various factors is obtained. It was found that improved risk control and macroeconomy factors reduced the number of NPLs. In particular, to reduce the number of NPLs, the capacity of banks to manage loans should be strengthened.

References
  1. [1] B. Aver, “An Empirical Analysis of Credit Risk Factors of the Slovenian Banking System,” Managing Global Transitions, Vol.6, pp. 317-334, 2008.
  2. [2] I. Bucur and S. Dragomirescu, “The Influence of Macroeconomic Conditions on Credit Risk: Case of Romanian Banking System,” Studies and Scientific Researches, Economics Edition, No.19, 2014.
  3. [3] M. D. Crouhy, D. Galai, and R. Mark, “A Comparative Analysis of Current Credit Risk Models,” J. of Banking and Finance, Vol.24, pp. 59-117, 2000.
  4. [4] V. Castro, “Macroeconomic determinants of the credit risk in the banking system: the case of GIPSI,” Economic Modeling, Vol.31, pp. 672-683, 2013.
  5. [5] A. Das and S. Ghosh, “Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation,” MPRA Paper, No.17301, 2007.
  6. [6] E. Fama, “Term Premiums and Default Premiums in Money Markets,” J. of Financial Economics, Vol.17, pp. 175-196, 1986.
  7. [7] H. Fofack, “Nonperforming Loans in Sub-Saharan Africa: Causal Analysis and Macroeconomic Implications,” World Bank Policy Research Working Paper, No.3769, 2005.
  8. [8] N. Gunsel, “Micro and Macro Determinants of Bank Fragility in North Cyprus Economy,” African J. of Business Management, Vol.3, pp. 1323-1329, 2012.
  9. [9] G. Jimenez and J. Saurina, “Credit Cycles, Credit Risk, and Prudential Regulation,” Int. J. of Central Banking, Vol.2, pp. 65-98, 2006.
  10. [10] P. Jakubik, “Macroeconomic Environment and Credit Risk,” Czech J. of Economic and Finance, Vol.57, pp. 50-78, 2007.
  11. [11] Z. Wang, “A Statistical Research on Determiing Impacts on Non-Performing Loans Ratio In Commercial Banks,” CZheJiang GongShang University, 2014.
  12. [12] D. E. Allen, R. R. Boffey, and R. J. Powell, “The Impact Of Contagion On Non-Performing Loans: Evidence From Australia And Canada,” J. of Business And Policy Research, Vol.7, No.2, pp. 13-24, 2012.
  13. [13] Nkusu, Mwanza, “Nonperforming Loans And Macrofinancial Vulnerabilities In Advanced Economies,” IMF Working Paper, WP/11/161, 2011.
  14. [14] M. Tracey, “The Impact of Non-Performing Loans On Loan Growth: An Econometric Case of Jamacia And Trinidad And Tobago,” 2011.
  15. [15] P. Louzis, T. Vouldis, and L. Metaxas, “Macroeconomic and bank-specific determinants of non-performing loans in Greece: a Comparative study of mortgage, business and consumer loan portfolios,” J. of Banking and Finance, Vol.36, pp. 1012-1027, 2012.
  16. [16] R. P. S. Poudel, “Macroeconomic determinants of credit risk in Nepalese banking industry,” Proc. of 21st Int. Business Research Conf., 2013.
  17. [17] V. Salas and J. Saurina, “Credit risk in two institutional regimes:Spanish commercial and savings banks,” J. of Financial Services Research, Vol.22, pp. 203-224, 2002.
  18. [18] N. Zribi and Y. Boujelbene, “The factors influencing bank credit risk: the case of Tunisia,” J. of Accounting and Taxation Vol.3, pp. 70-78, 2011.
  19. [19] R. D. Lisa, S. Zedda, F. Vallascas, F. Campolongo, and M. Marchesi, “Modelling Deposit Insurance Scheme Losses In A Basel 2 Framework,” J. of Financial Services Research, Vol.40, No.3, pp. 123-141, 2011.
  20. [20] B. Bernanke, M. Gertler, and S. Gilchrist, “The Financial Accelerator in a Quantitative Business Cycle Framework,” NBER Working Paper, No.6455, 1998.
  21. [21] E. I. Altman and G. Sabato, “Effects of the New Basel Capital Accord on Bank Capital Requirements for Smes,” J. of Financial Services Research, Vol.28, No.1-3, pp. 15-42, 2005.
  22. [22] K. Paetzmann, “Enterprise Risk Management: How Governance Regulation Affects Management Accounting and Control,” Zeitschrift FÜR Planung & Unternehmensste- Uerung, Vol.16, No.3, pp. 267-288, 2005.
  23. [23] S. Barisitz, “Nonperforming Loans In CESEE: What Do They Comprise?” Focuse on European Economic Integration, pp. 46-68, 2011.
  24. [24] S. Jha and X. Hui, “A Comparison of Financial Performance of Commercial Banks: A Case Study of Nepal,” African J. of Business Management, Vol.6, No.25, pp. 7601-7611, 2012.

*This site is desgined based on HTML5 and CSS3 for modern browsers, e.g. Chrome, Firefox, Safari, Edge, IE9,10,11, Opera.

Last updated on Dec. 12, 2017