Credit quality is an important constituent of a bank’s asset portfolio. Asset quality and inadequate capital reserves were two significant triggers of the Global Financial Crisis (GFC) in 2009. Since then, there has been substantial regulatory and internal risk management changes within the US banking industry. There are no previous specific studies on smaller US banks. This study reviews the empirical literature on the topic of asset quality, bank profitability and market value along with statistics specific to the US banking industry. The impact on profitability is assessed through the return on equity ratio (ROE) and the impact on market value is assessed through the market to book ratio (MTBR). Along with the non-performing loan ratio (NPL), three other CAMEL ratios were also used as independent variables: capital adequacy (TRWCA), liquidity (LIQ) and management efficiency (MAN) to assess their impact on profitability and market value. Panel data has been collected for fifteen smaller US banks and the Generalised Method of Moments (GMM) of estimation is used robustly to estimate the effects of CAMEL ratios on bank profitability and market value. The link between NPL and other ratios on bank profitability and market value in smaller US banks has been assessed. The importance of the NPL ratio for bank profitability and market value is once again confirmed.

JEL: G24, C22, C52, C53.

Ключові слова

non-performing loans; credit risk; bank-specific factors; dynamic panel.

Повний текст:



Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277-297.

Ali, M., & Puah, C. (2019). The internal determinants of bank profitability and stability: An insight from banking sector of Pakistan. Management Research Review, 42(1), 49-67.

BIS. (2018). History of the Basel Committee. Bank for International Settlement.

Bivens, J., & Wething, H. (2013). A progressive growth strategy for the USA.


Bloomberg. (2019). Bloomberg Professional [Online] Available at: Subscription Service (Assessed: 21 August 2019)

Board of Governors of the Federal Reserve System. (2018). Financial Stability Report. The Federal Reserve System.

Board of Governors of the Federal Reserve System. (2019). Supervision and Regulation Report. The Federal Reserve System.

Bolt, W., de Haan, L., Hoeberichts, M., van Oordt, M., & Swank, J. (2012). Bank profitability during recessions. Journal of Banking & Finance, 36, 2552-2564.

Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking and Finance, 13, 65-79.

Bouzgarrou, H., Jouida, S. L, & Louhichi, W. (2018). Bank profitability during and before the financial crisis: Domestic versus foreign banks. Research in International Business and Finance, 44, 26-39.

Chronopoulos, D., Liu, H., McMillan, F., & Wilson, J. (2015). The dynamics of US bank profitability. The European Journal of Finance, 21(5), 427-443.

Cucinelli, D. (2015). The impact of non-performing loans on bank lending behavior: Evidence from the Italian banking sector. Eurasian Journal of Business and EconFederal Reserve Board. (n.d.). Structure of the Federal Reserve System.

Gasbarro, D., Sadguna, I., & Zumwalt, J. (2002). The changing relationship between CAMEL ratings and bank soundness during the Indonesian banking crisis. Review of Quantitative Finance and Accounting, 19, 247-260.

Ghosh, A. (2017). Impact of non-performing loans on US product and labor markets. Journal of Financial Economic Policy, 9(3), 302-323.

Gugler, K., & Peev, E. (2018). The persistence of profits in banking: An international comparison. Applied Economics, 50(55), 5996-6009.

Hoffmann, P. (2011). Determinants of the profitability of the US banking industry. International Journal of Business and Social Science, 2(22), 255-269.

Ishak, I., Ismail, N., Razali, N.A., Bakar, R., & Ramlan, H. (2016). Credit risk management and profitability of banks listed on Bursa Malaysia. International Symposium & Exhibition on Business and Accounting.

Kasavica, P., & Jovic, Z. (2015). Impact of asset quality on bank profitability - case study. Industrija, 43(4), 105-128.

Liu, D-Y., Wu, Y-C., Lin, C-H., & Lu, W-M. (2017). The effects of nonperforming loans on dynamic network bank performance. Discrete Dynamics in Nature and Society, 2017, 9458315.

Reddy, D.M., & Prasad, K.V.N. (2011). Evaluating performance of regional rural banks: An application of Camel model. Journal of Arts, Science & Commerce, 2(4), 61-67.

Saeed, M.S., & Zahid, N. (2016). The impact of credit risk on profitability of the commercial banks. Journal of Business and Financial Affairs, 5(2), 1-7.

Sargan, J. D. (1988) [1975]. «Testing for misspecification after estimating usinginstrumental variables». Contributions to Econometrics. New York: Cambridge University Press.

Terraza, V. (2011). The effect of bank size on risk ratios: Implications of banks' performance. Procedia Economics and Finance, 30(2015), 903-909.

Tran, V., Lin, C-T., & Nguyen, H. (2016). Liquidity creation, regulatory capital, and bank profitability. International Review of Financial Analysis, 48, 98-109.



  • Поки немає зовнішніх посилань.