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Determinants of Non-Performing Loans in a Small Island Economy of Fiji: Accounting for COVID-19, Bank-Type, and Globalisation

Author

Listed:
  • Shasnil Avinesh Chand

    (School of Economics and Finance, Fiji National University, Suva P.O. Box 3722, Fiji)

  • Ronald Ravinesh Kumar

    (Department of Economics and Finance, The Business School, Saigon South Campus, RMIT University, Ho-Chi-Minh City 700000, Vietnam)

  • Peter Josef Stauvermann

    (Department of Global Business and Economics, Changwon National University, Changwon 51-142, Republic of Korea)

Abstract
An increase in non-performing loans and bad debts in the banking sector can make banks vulnerable to a loss of confidence among customers and other banks and a banking collapse. The recent pandemic (COVID-19) and the evolving globalisation can affect bank operations, although the effects may depend on the type of banks and other bank-specific factors. In this paper, we revisit the topic on the determinants of non-performing loans of banks in a small island economy of Fiji over the period 2000 to 2022. We apply a fixed-effect method and consider seven banks (five commercial banks and two non-bank financial institutions). In our estimations, we examine the effect of bank-specific factors and control for the social and economic globalisation, the GFC, the COVID-19 pandemic, and bank-type effects, as well as the effect of the interaction between the bank type and the pandemic, as key contributions of the study. Overall, our results are consistent in terms of the effects noted from the bank-specific factors. From the extended model estimations, we note that COVID-19 had a more adverse effect on loan losses than the GFC, and the interaction between the bank type and COVID-19 indicates that non-banks were highly vulnerable to loan losses, whereas commercial banks exhibited greater preparedness. Economic globalisation reduces bank losses, whereas social globalisation exacerbates NPLs.

Suggested Citation

  • Shasnil Avinesh Chand & Ronald Ravinesh Kumar & Peter Josef Stauvermann, 2023. "Determinants of Non-Performing Loans in a Small Island Economy of Fiji: Accounting for COVID-19, Bank-Type, and Globalisation," JRFM, MDPI, vol. 16(10), pages 1-35, October.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:10:p:436-:d:1255183
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    References listed on IDEAS

    as
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