Bank Loan Concentration Intensity,Financial Characteristics,and Performance

• Main Authors: Yu-Yan Ya, 葉瑜嬿
• Other Authors: Yong-Chin Liu
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/02468336864796346101

碩士 === 亞洲大學 === 財務金融學系 === 103 === This study aims to examine risks and returns on concentrated and diversified strategies of bank lending, considering economy conditions, borrowing firms’ sensitivity to economy, and industry competition intensity. Also, the study explores the effect of bank’s abilities to credit monitoring and risk tolerance on the selection of lending strategy. This study tests three hypotheses. The first, when the economy is booming (recessionary), lending to firms with a high (low) sensitivity to economy conditions has a higher return and lower risk. Second, lending to industry with high degree of competition has a lower return and risk; and the third, bank with stronger ability to credit monitoring and weaker ability to loading risk will select a lending strategy concentrating on industries with high competition. The sample is domestic and foreign banks operating in Taiwan. Using regression analysis of yearly data from 1994 to 2013, the findings are that there is no significant effect of lending strategies on net interest profit; when the economy is booming, lending concentration on firms with low-sensitive for economy have a lower return on assets and a higher ratio of non-performing loans, while concentration on firms with high-sensitive for economy have a lower ratio of non-performing loans. This result is consistent with the prediction of the first hypothesis related to the booming economy, but the first hypothesis related to the recessionary economy does not hold. Furthermore, the second and third hypotheses are supported by the empirical evidence. Bank’s abilities to credit monitoring and risk loading influence the selection for suitable lending strategy, and it is not necessary for banks to adopt concentrated or diversified lending. The performance on lending strategy is affected by borrowing firms’ sensitivity to economy and industry competition intensity.