Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe
This paper investigates the effects of cost efficiency on non-performing loans (NPLs) in Zimbabwe during dollarisation. The research applies the random effects and bootstrap quantile regression models using the full dollarisation era dataset for 13 banks from 2009 to 2017. The obtained results reve...
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| Format: | Article |
| Language: | English |
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Vilnius University Press
2024-12-01
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| Series: | Organizations and Markets in Emerging Economies |
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| Online Access: | https://ojs.test/index.php/omee/article/view/34800 |
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| author | Blessing Katuka Calvin Mudzingiri Edson Vengesai Juniours Marire |
| author_facet | Blessing Katuka Calvin Mudzingiri Edson Vengesai Juniours Marire |
| author_sort | Blessing Katuka |
| collection | DOAJ |
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This paper investigates the effects of cost efficiency on non-performing loans (NPLs) in Zimbabwe during dollarisation. The research applies the random effects and bootstrap quantile regression models using the full dollarisation era dataset for 13 banks from 2009 to 2017. The obtained results revealed that: (i) the average cost efficiency score for the Zimbabwean banking industry is 81.36%, (ii) improvement in cost efficiency leads to an increase in NPLs but begins to fall for a cost inefficiency level of 7.14% and below, (iii) the effect of bank cost efficiency on NPLs is prominent and highly significant at a higher quantile (90th), (iv) the interaction effect between cost efficiency and bank size on NPLs is negative and significant. According to these results, NPLs tend to fall when large banks are more cost-efficient. Thus, the present study recommends that banks employ strategies that simultaneously improve the asset base and cost efficiency.
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| format | Article |
| id | doaj-art-50834d24079149e890f10d505609d0cc |
| institution | Kabale University |
| issn | 2029-4581 2345-0037 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | Vilnius University Press |
| record_format | Article |
| series | Organizations and Markets in Emerging Economies |
| spelling | doaj-art-50834d24079149e890f10d505609d0cc2025-01-03T06:38:19ZengVilnius University PressOrganizations and Markets in Emerging Economies2029-45812345-00372024-12-01152(31)10.15388/omee.2024.15.17Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from ZimbabweBlessing Katuka0https://orcid.org/0000-0003-4716-8399Calvin Mudzingiri1https://orcid.org/0000-0002-1186-4109Edson Vengesai2Juniours Marire3University of the Free StateUniversity of the Free StateUniversity of the Free StateRhodes University This paper investigates the effects of cost efficiency on non-performing loans (NPLs) in Zimbabwe during dollarisation. The research applies the random effects and bootstrap quantile regression models using the full dollarisation era dataset for 13 banks from 2009 to 2017. The obtained results revealed that: (i) the average cost efficiency score for the Zimbabwean banking industry is 81.36%, (ii) improvement in cost efficiency leads to an increase in NPLs but begins to fall for a cost inefficiency level of 7.14% and below, (iii) the effect of bank cost efficiency on NPLs is prominent and highly significant at a higher quantile (90th), (iv) the interaction effect between cost efficiency and bank size on NPLs is negative and significant. According to these results, NPLs tend to fall when large banks are more cost-efficient. Thus, the present study recommends that banks employ strategies that simultaneously improve the asset base and cost efficiency. https://ojs.test/index.php/omee/article/view/34800non-performing loanscost efficiencyskimping hypothesisdollarisationquantile regressionquadratic regression |
| spellingShingle | Blessing Katuka Calvin Mudzingiri Edson Vengesai Juniours Marire Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe Organizations and Markets in Emerging Economies non-performing loans cost efficiency skimping hypothesis dollarisation quantile regression quadratic regression |
| title | Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe |
| title_full | Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe |
| title_fullStr | Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe |
| title_full_unstemmed | Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe |
| title_short | Examining the Impact of Bank Cost Efficiency on Non-Performing Loans in a Dollarised Economy: Evidence from Zimbabwe |
| title_sort | examining the impact of bank cost efficiency on non performing loans in a dollarised economy evidence from zimbabwe |
| topic | non-performing loans cost efficiency skimping hypothesis dollarisation quantile regression quadratic regression |
| url | https://ojs.test/index.php/omee/article/view/34800 |
| work_keys_str_mv | AT blessingkatuka examiningtheimpactofbankcostefficiencyonnonperformingloansinadollarisedeconomyevidencefromzimbabwe AT calvinmudzingiri examiningtheimpactofbankcostefficiencyonnonperformingloansinadollarisedeconomyevidencefromzimbabwe AT edsonvengesai examiningtheimpactofbankcostefficiencyonnonperformingloansinadollarisedeconomyevidencefromzimbabwe AT junioursmarire examiningtheimpactofbankcostefficiencyonnonperformingloansinadollarisedeconomyevidencefromzimbabwe |