The simultaneous relationship between profitability and credit risk: Empirical evidence of people’s credit funds in An Giang

Abstract

The relationship between profitability and credit risk complicates the performance of credit institutions. This study aimsto investigate the simultaneous relationship between profitability and credit risk of People’s Credit Funds (PCFs) inAn Giang. Fixed Effect Model (FEM), Random Effect Model (REM) and Generalized Two Stage Least Squares (G2SLS) were used to estimate two simultaneous equations namely profitability and credit risk. Data were collected from 24 People’s Credit Funds in An Giang from 2010 to 2014. This result indicates that the simultaneous relationship between profitability does not exist. Particularly, credit risk negatively influences on profitability but not vice versa. In addition, this study also confirmsthat capital ratio, economic growth and inflation had significantly infulence on net interest margin. Meanwhile, credit growth rate, PCF’s size and earing asset ratio negatively influence non-performing loan.

Keywords

• an giang
• lợi nhuận
• quỹ tín dụng nhân dân
• rủi ro tín dụng