The paper uses the commercial banks in the U S that joined the Federal Deposit Insurance Corporation (FDIC) as the samples during the 1984Q1-2015Q3 The structure of the thesis involves the use of time series data and a multiple regression is built to assess a time series model and analyze whether macroeconomic conditions can contribute significantly to the level of non-performing loans to total loans in the U S banking system Further we want to explore whether the non-performing loans fluctuate in accordance with the macroeconomic condition along with in boom or in recession Finally we examine whether the non-performing loans have an indirect influence on banks’ asset quality and to check whether lending decisions of U S banks exhibit moral hazard Our results show that the non-performing loans actually fluctuate associated with business cycle When the economy is in bust the ratio of the non-performing loans raises up Through the time series model it can be proved that there are significantly positive correlation between non-performing loans and the ratio of risk weighted assets It represents the non-performing loans affect the asset quality indirectly Moreover we can find the non-performing loans versus risk weighted assets risk weighted assets versus banks’ loans and the banks’ loans versus non-performing loans have significant Granger-cause relations The phenomenon explains that a bank’ managers have an incentive to lend more loans when the bank’s risk enhances The result of the thesis is consistent with the moral hazard hypothesis
Date of Award | 2016 Jun 27 |
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Original language | English |
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Supervisor | Tse-Shih Wang (Supervisor) |
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More loans more risk-taking? The case of the U S banks
采吟, 蔡. (Author). 2016 Jun 27
Student thesis: Master's Thesis