Skip to main content
Financial Innovation

Table 7 The impact of country risk rating on the banking sector’s credit risk (2004–2020)

From: Does country risk impact the banking sectors’ non-performing loans? Evidence from BRICS emerging economies

Independent Variables

Quantile estimated coefficients

Q.25

Q.50

Q.75

Q.95

Banking sector-specific variables

Profitability

− 0.413

− 0.444*

− 0.743*

− 0.728*

 

(0.136)

(0.002)

(0.008)

(0.000)

Capital regulation

− 0.046**

− 0.036

− 0.042**

− 0.028*

 

(0.021)

(0.241)

(0.032)

(0.001)

Liquidity

− 0.081*

− 0.052*

− 0.080***

− 0.035

 

(0.002)

(0.000)

(0.086)

(0.332)

Inefficiency

0.185

0.044

0.026*

0.089***

 

(0.119)

(0.158)

(0.002)

(0.094)

Income diversification

− 0.247

− 0.539***

− 0.336***

− 0.453

 

(0.151)

(0.094)

(0.093)

(0.256)

Country and global-level variables

Country risk index

− 0.105**

− 0.131*

− 0.153**

− 0.175***

 

(0.026)

(0.003)

(0.021)

(0.064)

Financial market development

0.013

0.016**

0.012*

0.022***

 

(0.254)

(0.044)

(0.000)

(0.064)

Lending interest rate

0.073

0.182**

0.135**

0.057*

 

(0.321)

(0.034)

(0.038)

(0.002)

Global risk

0.031**

0.036*

0.034*

0.022***

 

(0.021)

(0.000)

(0.001)

(0.068)

TC dummies

YES

YES

YES

YES

  1. Table 7 shows the effect of the country risk index on the BRICS banking sector’s credit risk. Profitability is the bank return on assets; Capital regulation is the bank regulatory capital to risk-weighted assets; Liquidity is the bank liquid reserves to bank assets ratio; Inefficiency is the bank cost to income ratio; Income diversification is the bank non-interest income to total income; Country risk index is the ICRG country risk rating; Financial market development is the domestic credit provided by the banking sector to GDP; Lending interest rate is the bank rate that usually meets the short- and medium-term financing needs of the private sector; Global risk is global economic policy uncertainty. TC dummies are time and country dummies. The 25th, 50th, 75th, and 95th percentiles of the NPL rate are reported. Numbers in parentheses for each column denote the P values. *, **, and *** denote the significance level at 1%, 5%, and 10%, respectively
Back to article page