CREDIT RISK AND PROFITABILITY OF COMMERCIAL BANKS

Abstract

Banking sectors is important sector in an economy; it works as smooth running of economy. But there are various investors are interesting to invest in common stock of banks. The market price of stock affects investment of investors. This study is conducted on impact of firm-specific and macroeconomic determinants of common stock price of sample bank. The main objectives of study are to identify the factors that affect to credit risk of commercial banks in Nepal. The study has been conducted on Descriptive and Causal comparative research design with sample size of 10 commercial bank over the period of 2014 to 2022 leading to total 90 observations. Secondary source of data are used for in study with random sampling method. The panel data analysis is used. Different statistical tools i.e., correlation and regression analysis have been used to analyze the data of sample development banks. In the study three type of regression are used. They are OLS, Fixed effect and Random effect model. To test these models, two test are applied i.e., Reduntdant fixed effect test test and Hasuman test. From the test, Random effect model is appropriate for NIM and ROE.fixed effect model is appropriate for ROA. The major finding of the study shows that earning per share (EPS) influence the investment in development banking common stock. This study suggest to investors, banks and further researchers. Keywords: Return on assets (ROA), Retune on equity (ROE), Leverage, Panel Data, commercial Banks