Understanding bank lending and its relationship with profitability and non-performing loans: a meta-analysis

Abstract

Purpose

This study is a meta-analysis of the relationship between bank lending, profitability and non-performing loans (NPLs), and the purpose is to identify a research gap in studying this very crucial triad.

Design/methodology/approach

Firstly, relevant keywords are used to pull the studies from the Scopus and Web of Science (WoS) databases. The initial result is then narrowed down using relevant search criteria by manually filtering the studies based on the title and abstracts, out of which meta-analysis has been done of the findings of the top 200 papers (citation-based).

Findings

The literature in this field of study indicates heterogeneous results for relationships between bank lending and NPLs, bank lending and profitability and also NPLs and profitability. The meta-analysis of the results also reveals that the behaviour of these variables shows heterogeneity, which, based on the literature review, can be attributed to the different economic conditions during the study period and thus indicates nonlinearity in the behaviour of these variables.

Originality/value

This review explores the interrelationship of three variables, as they are very important to strike a proper balance between growth and safety in the banking industry, but the same has been inadequately researched in past studies.

Citation

Gupta, S. and Bansal, R. (2024), "Understanding bank lending and its relationship with profitability and non-performing loans: a meta-analysis", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-03-2023-0060