The impact of ownership structure on bank credit risk: Evidence from Bangladesh

Abstract

This study investigates the impact of ownership structure of Commercial Banks on bank credit risk in an emerging market like Bangladesh. Prais Winten regression model is applied to a sample of 32 commercial banks from the year of 2000 to 2014 with 390 observations. The result reveals that National Commercial Banks, depositors' influence, shareholders' influence, liquidity and profitability are negatively associated with credit risk whereas lag risk has a significant positive impact on credit risk. The effect of banks ownership structure on credit risk divulges a delicate governance of the banking sector. The study conveys a momentous implication of research findings in the national economy. It also found that national commercial banks have the tendency of violating the rules and absorbing heavy risk. It suggests that policy maker should rethink about the government ownership of banks. Therefore the denationalization or reducing government ownership structure is highly recommended.