Towards crises prevention: Factors affecting lending behaviour

Abstract

The purpose of this study is to examine the behavior of bank lending in ASEAN economies. For this purpose, macroeconomic and bank related factors are identified from existing literature, defining the lending behavior. Data is collected from official sources like web pages, company's annual report and online databases. A sample of five banking firm from four ASEAN economies is collected over 2011-2017 with annual observations. Regression analysis indicates the fact that both macroeconomic factors (GDP growth, inflation) are playing their significant role in defining the lending behavior of bank as measured through net loans and unused commitments. From bank related variables, liquidity ratio, risk, return on assets and equity are found to be significant determinant for bank lending. it is highly suggested that credit managers in banking firms, and related departments should use these findings as documentary evidence for the future decision making. Additionally, these findings are also useful facts for country administration, dealing with the macroeconomic factors and their direct influence on bank lending. However, various limitations are also observed which can be addressed in upcoming research studies. Sample size is limited to five banking firms from each state with seven years of time period. At second, specific macroeconomic and bank related measures are used which can be expanded in coming studies.