Determinants of Bank Credit Risk: Empirical Evidence for Commercial Banks from Republic of North Macedonia

Georgieva Svrtinov, Vesna and Sofijanova, Elenica and Nikoloski, Krume and Miteva-Kacarski, Emilija (2019) Determinants of Bank Credit Risk: Empirical Evidence for Commercial Banks from Republic of North Macedonia. Journal of Economics. ISSN 1857-9973


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Abstract Credit risk is most simply defined as the potential that a bank borrower or counter party will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a bank's risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organisation.We have to underline that the revenue of banks comes primarily from interest on loans and accordingly loans form a major source of credit risk.This study aimed to investigate the credit risk determinants in Republic of North Macedonia banking sector. We include bank-specific variables in the analysis, (bank profitability, bank liquidity, capital ratio , bank size, growth rate in loans) using a balanced panel dataset of seven commercial banks, which have published revised financial statement on the web site of Electronic reporting system from listed companies on Macedonian stock exchange, over the period 2013-2018. To provide complete analysis, this study employed three different estimation methods: pooled OLS, Fixed effect and GLS Random effect models.The findings revealed that, capital ratio, growth rate in loans, bank size and bank liquidity, have significant correlation with credit risk. Capital ratio, growth rate in loans, and bank liquidity have inverse or negative correlation with credit risk, which means that if this variables increase the credit risk will decrease. Bank size has positive correlation with credit risk, showing that the increase of the bank size will increase credit risk. Our research doesn’t find significant correlation between credit risk and bank profitability variable. This fact shows that the bank profitability in the case of banking sector in the Republic of North Macedonia has no statistical significance for the credit risk. Kew words: balanced panel data set, bank-specific variables, banking sector in the Republic of North Macedonia , credit risk determinants, non performing loans

Item Type: Article
Subjects: Social Sciences > Economics and business
Divisions: Faculty of Economics
Depositing User: Vesna Georgieva Svrtinov
Date Deposited: 03 Feb 2020 10:32
Last Modified: 03 Feb 2020 10:32

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