Journal of Finance & Banking Studies 6(1), 2017: 51-68 Page51 Finance & Banking Studies IJFBS, VOL 6 NO 1 ISSN: 2147-4486 Contents available at www.ssbfnet.com/ojs https://doi.org/10.20525/ijfbs.v6i1.617 Determinants of Non-performing Loans: A Comparative Study of Pakistan, India, and Bangladesh Muhammad Waqas Corresponding author: Department of Management Science, Capital University of Science and Technology, Islamabad, Pakistan Nudrat Fatima Department of Management Science, Capital University of Science and Technology, Islamabad, Pakistan Aryan Khan Department of Management Science, Capital University of Science and Technology, Islamabad, Pakistan Muhammad Arif Dr., Assistant Professor, Department of Management Science, Govt. College of Management Sciences, Swabi, Pakistan Abstract The aim of the empirical study is to investigate credit risk determinants in banking sectors across three kinds of South Asian economies. An accumulated sample of 105 unbalanced panel data of financial firms over the period of 2000-2015, by applying General Method of Moment (GMM) estimation techniques one-step at the difference in order to identify factors influencing credit risk. This study is inspired by two broad categories of explanatory variables which are bank-specific and macroeconomic. Bank-specific factors influencing unsystematic risk, while macroeconomic factors promoting systematic risk. The study uses a proxy of non-performing loans for credit risk in banking sectors of Pakistan, India, and Bangladesh. The empirical results have been found aligned with theoretical arguments and literature as expected. In comparison, NPLs in Pakistan is greater than India and Bangladesh, while India has the lowest ratio of non-performing loans. The study documents that bank-specific factors (inefficiency, profitability, capital ratio and leverage) have a significant contribution towards credit risk. Further, the study also finds a significant impact of macroeconomic variables on non-performing loans. While, the result in the case of Bangladesh predicts contradictions that have no significant effect on non-performing loans at various levels. The overall results indicate that credit risk is not influenced by only external factors but also affect by internal factors like bad management and skimping etc. Keywords: Non-performing loans, Credit Risk, Bank-specific, Macroeconomic, and Dynamic Panel Data JEL Classification: G21, C23 CORE Metadata, citation and similar papers at core.ac.uk Provided by Society for the Study of Business & Finance- SSBFNET: E-Journals