Bank Specific Factors And Non-performing Loans of Commercial Banks In Liberia

This study investigates the nexus between bank-specific factors and nonperforming loans (NPLs) in Liberia's commercial banks through a retrospective panel study design, employing a quantitative approach based on the Moral Hazard Theory. Targeting the nine listed commercial banks in Liberia, the study focuses on key variables: return on equity (ROE), return on assets (ROA), bank cost efficiency, and bank income diversification. Data were sourced from certified audited records, and descriptive statistics, including correlation analysis via SPSS software, were applied. Results reveal a significant negative correlation (r = -0.957, p = 0.043) between ROE and NPLs at LBDI Bank. Conversely, no significant associations are found between ROA, bank cost efficiency, and bank income diversification with NPLs in commercial banks. The study underscores the centrality of ROE in influencing NPLs and recommends future research to incorporate a broader spectrum of both bank-specific and economic factors over an extended study period of 10-15 years for a comprehensive understanding of nonperforming loans in Liberia's commercial banks.