Citation

Arhinful, Richard and Mensah, Leviticus and Gyamfi, Bright Akwasi and Obeng, Hayford Asare (2025) The Impact of Non-Performing Loans on Bank Growth: The Moderating Roles of Bank Size and Capital Adequacy Ratio—Evidence from U.S. Banks. International Journal of Financial Studies, 13 (3). p. 165. ISSN 2227-7072

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Abstract

Banks in the United States face persistent challenges from non-performing loans (NPLs), despite conducting thorough client evaluations before issuing loans. To mitigate the impact of NPLs and support both local and global growth, banks must adopt effective risk management strategies. This study investigates the effect of NPLs on bank growth and the moderating of bank size and Capital Adequacy Ratio (CAR) through the lens of the Resource-Based View (RBV) theory. A sample of 253 banks listed on the New York Stock Exchange from 2006 to 2023 was selected using specific inclusion criteria from the Thomson Reuters Eikon DataStream. To address cross-sectional dependence and endogeneity, advanced estimation techniques—Feasible Generalized Least Squares (FGLS), Driscoll and Kraay standard errors, and the Generalized Method of Moments (GMM)—were employed. The results show that NPLs have a significant negative impact on banks’ asset and income growth. Furthermore, bank size and capital adequacy ratio (CAR) negatively and significantly moderate this relationship. These findings underscore the need for banks to enhance credit risk management by strengthening loan approval processes and leveraging advanced analytics to assess borrower risk more accurately.

Item Type:	Article
Uncontrolled Keywords:	Asset growth, banks, income growth
Subjects:	H Social Sciences > HG Finance > HG1501-3550 Banking
Divisions:	Faculty of Management (FOM)
Depositing User:	Nurin Syazwani Azmi
Date Deposited:	07 Nov 2025 04:30
Last Modified:	07 Nov 2025 04:30
URII:	http://shdl.mmu.edu.my/id/eprint/14759

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