Hello everyone.
In my regression analysis my liquidity and credit risk has positive coefficient. However, credit risk ratio was determined by total net charge off / total loans which means if the ratio increase it will affect profitability negatively. However, my output shows when net charge off to total loans increase, it will affect profitability positively. Why is this happening?
and also my is liquidity = total loans / total assets
The global financial crisis has induced a series of failures of most conventional banks. This study investigates the main sources of banking fragility. We use a sample of 49 banks operating in the MENA region over the period 2006–2013 to analyze the relationship between credit risk and liquidity risk and its impact on bank stability. Our results show that credit risk and liquidity risk do not have an economically meaningful reciprocal contemporaneous or time-lagged relationship. However, both risks separately influence bank stability and their interaction contributes to bank instability. These findings provide bank managers with more understanding of bank risk and serve as an underpinning for recent regulatory efforts aimed at strengthening the joint risk management of liquidity and credit risks
Thank you Dr Bhadrappa Haralayya ,
Could you please explain in more simple way? i just need to know are those results wrong or right? i will use them in my dissertation. I couldnt get your point
Interesting topic related to the issue of credit risk. The topic is important as shown by the global financial crisis of 2008.
Best wishes,
Dariusz Prokopowicz
