Determinants of Non-Performing Loans in Asia: Is Southeast Asia Different?

  • Amirudin Mohd Nor Universiti Teknologi MARA
  • Shafinar Ismail Universiti Teknologi MARA
  • Nur Hayati Abd Rahman Universiti Teknologi MARA
Keywords: Non-Performing Loans, Two-Step System GMM, Regulatory Variables


In this paper, we explore the determinants of non-performing loans (NPLs) in Asia using a panel data set across 9 countries covering the Middle East, Southeast Asia (SEA) and South Asia countries over a period of 2000 to 2014, and test whether those determinants affect the Southeast Asia differently. The two-step System GMM results indicate that the GDP growth and liquid assets to total assets significantly affect NPLs in a negative manner, while the Southeast Asia is no different from the other regions despite their successful management in NPLs during 2008 crisis. It suggests that other regions may adopt the successful strategies implemented by the SEA countries. Apart from the above, the regulatory variables show mixed results with supervisory power significantly and positively affect the NPLs while the capital stringency requirement is insignificant, contrary to the theoretical expectations. The results are robust to model specification.


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How to Cite
Amirudin Mohd Nor, Shafinar Ismail, & Nur Hayati Abd Rahman. (2021). Determinants of Non-Performing Loans in Asia: Is Southeast Asia Different?. International Journal of Business and Society, 22(1), 431-442.