| Summary: | 碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 103 === For a long time, banking system has played a role as the financial intermediary to absorb excess funds and lend those to fund demanders. However, since new banking law adopted in 1990, which gradually relaxes the financial control for opening new banks, commercial banks for increasing market share and profitability, coupled with poor management and credit quality of the bank''s internal oversight, have resulted in the deterioration of quality of commercial banks’ assets. Since the 1997 Asian financial crisis, non-performing loan ratio has increased, and the rates of return on assets and net worth have decreased, that is the result of excessive competition, due to large number of banks and small size of banks. In the highly competitive financial environment, the improvement of the financial quality and the maintenance of competitive advantage may be accomplished by reducing the adverse loans, in addition to pursuing a growth of business loans. This study examines the impacts of banks’ financial indicators and macroeconomic factors on the bank''s non-performing loan ratio, by utilizing panel unit root tests, panel VAR model, Granger causality tests and Impulse response functions. The sample for this study includes 31 commercial banks in Taiwan with the period of 2004 to 2014. The empirical results show that non-performing loan ratio and GDP have dual causality relationship; non-performing loan ratio Granger-causes size of banks; non-performing loan ratio have an indirect effect on ROE.
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