Nexus Between Credit Risk, Liquidity Risk, Corporate Governance and Bank Performance During Times of Crisis

Abstract

Bank-specific risks along with corporate governance mechanisms are an important consideration for measuring bank performance. Therefore, this study aims to explore the role of credit and liquidity risk along with bank governance for the performance of banks. The present study included a sample of 116 banks operating within Asian emerging nations, spanning the period from 2012 to 2022. It utilizes static and dynamic panel methods for testing the main hypothesis and for confirming robustness. This study finds that credit risk (Z-score, Non-performing loans), liquidity risk (Current ratio, Loan to deposit ratio) and corporate governance (Board size and CEO duality) significantly influence the performance of banks in Asian emerging economies. Banking management should maintain procedures for loan granting and timely repayment of loan instalments from consumers to control credit risk. Managers of banks should keep a close eye on their banks' liquidity conditions and implement appropriate governance systems to help them operate and earn better.