Variables | Model 4 | Model 5 | Model 6 |
|---|
SOL
i,t-1
| 0.5236a (0.0354) | 0.5648a (0.0985) | 0.4648a (0.0126) |
LG
it
| −0.0894a (0.0058) | −0.0648a (0.0069) | − 0.0594a (0.0086) |
Size
it
| 0.4158a (0.0659) | 0.3140a (0.0032) | 0.3678b (0.1824) |
EFF
it
| −0.0489a (0.0031) | −0.0324a (0.0124) | − 0.0245a (0.0068) |
GDP
t
| 0.4598a (0.0458) | 0.4691a (0.0459) | Â |
INF
t
| −0.0194a (0.0078) |  | −0.0214a (0.0045) |
UNEMPL
t
|  |  | −0.8971a (0.0659) |
ROL
t
| 1.945a (0.6597) | Â | Â |
POLST
t
| Â | 0.8791a (0.2359) | Â |
Observation | 369 | 369 | 369 |
Sargan Test | 0.845 | 0.786 | 0.846 |
AR1 | 0.348 | 0.784 | 0.845 |
AR2 | 0.236 | 0.214 | 0.215 |
- Note: Parentheses showing standard errors, a. b indicate 1%, 5% and 10% level of significant respectively. L_SOLit-1 represents the lag of solvency ratio which is calculated by Solvency ratio = Total capital (tier 1 + tier 2)/total risk-weighted assets. Higher capitals usually force to indulge in activities of risky credit which result credit losses. LGit is loan growth collected from bankscope which is our main independent variable in the model that influence on dependent variable Solvency, Sizeit denotes natural logarithm of total assets. EFFit: non-interest expenses to total assets represent the efficiency ratio. Solvency will decrease due to the increase in non-interest expenses include all time of salary payments, provision of losses, professional services fee, taxes, and property leases. GDPt, INFt, UNEMPLt, ROLt and POLSTt denotes gross domestic product, inflation, unemployment, rule of law and political stability respectively used as a macro (control variables) in the model for the purpose of most robust results of coefficients. For further descriptions of these variables, please see (Table 1 Main variables)
