The Influence of Credit Risk Management Indicators on Profitability Attributes: Empirical evidence from the State-Owned Commercial Banks in Bangladesh

Abstract

Purpose: The purpose of this study is to examine the impact of credit risk management indicators on the performance of Bangladesh’s state-owned commercial banks. Six state-owned commercial banks’ perspectives and board information are used in the examination. Methodology: In order to conduct the examination, Stata 14.2 programming was used. It is used to determine how rational it is to distribute an arbitrary variable that is fundamental to the informative index. Then, the Leven Lin Chu unit root test and Hadri LM unit root test were used to determine if the variables used were stationary. Findings: I looked at correlation coefficients and variance-inflating factors to see if there were any difficulties with multicollinearity among free factors. The focus also employs illuminating factual examination to outline the impact of credit risk and board factors on productivity, as well as relationship lattice to assess the degree of connections between the autonomous factors and the benefit of state-owned commercial banks. Using a fixed impact and pooled OLS relapses, I can see that credit hazard significantly affects benefits. According to the law, banks are obligated to enhance their credit hazard. It is important to keep an eye on non-performing advances, functional gambles, and financing cost hazard in addition to the subjective resource portfolio that was considered to have a significant impact on productivity. Practical Implications: The findings of this analysis have some managerial implications. This study gives managers actual evidence on the impact of credit risk management indicators on bank performance, allowing them to discover ways to improve bank performance. Policymakers, regulators, and bank management should pay more attention to credit risk management indicators. Regulators should guarantee banks implement credit risk management rules to build a robust banking industry and achieve sustainable development goals. Originality: This paper is, as far as we know, the first detailed empirical analysis using the most recent data to look at how credit risk management indicators affect the performance of Bangladesh’s state-owned commercial banks.