Explaining the endogeneity between the credit risk, liquidity risk, and off-balance sheet activities in commercial banks: a case of South Asian economies

MF Basheer, W Waemustafa… - International …, 2021 - inderscienceonline.com
International Journal of Monetary Economics and Finance, 2021inderscienceonline.com
The main objective of the current study is explaining the endogeneity among liquidity risk
(LIQDR), credit risk (CRDR) and off-balance sheet activities. The balanced panel of 81
banks over a period of five years from 2013-2017 is chosen to investigate achieve the
research objectives. Fixed effect and generalised method of momentum panel estimates,
followed by a series of diagnostic tests have appeared most appropriate for the study. The
findings of the Hausman test have confirmed the presence of endogeneity. Arellano-Bond …
The main objective of the current study is explaining the endogeneity among liquidity risk (LIQDR), credit risk (CRDR) and off-balance sheet activities. The balanced panel of 81 banks over a period of five years from 2013-2017 is chosen to investigate achieve the research objectives. Fixed effect and generalised method of momentum panel estimates, followed by a series of diagnostic tests have appeared most appropriate for the study. The findings of the Hausman test have confirmed the presence of endogeneity. Arellano-Bond test for zero autocorrelation are estimated in the generalised method of moments (GMM) analysis of the work in our case. The findings have provided the support that South Asian banks use OBSA for hedging purposes. The LIQDR, and CRDR are in significant positive relationship with each other. The findings of the study have provided more support to the market portfolio theory and finical intermediation theory.
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