CREDIT EXTENSION BEHAVIOR AND LOANS INTEREST INCOME OF COMMERCIAL BANK

Abstract

The objective of this study was to study the behavior of credit extension and ability to find interest income from loans and study the relationship between credit extension behavior and the ability to generate interest income from loans. The annual data between 2011 – 2018 were collected from 14 commercial banks registered in Thailand. This study tested the stationary data using the panel unit-root test by Fisher’s method and the long-term equilibrium testing using Johansen Co-integration test by Pedroni’s and Kao’s (ADF Test) method. The suitability of the model was tested with the Hausman-test and Coefficient estimation by the Random Effect Model method. The results showed that the commercial banks tended to extend more loans, especially business loans that had a greater expansion rate than personal loans. The commercial banks also had a greater ability to find more interest income from loans. In addition, it was found that personal loan extension behavior and business loan expansion behavior of commercial banks were significantly correlated with the ability to find interest income from loans. As for the study classified by the size of commercial banks, it was found that large commercial banks tended to extend more personal loans than medium and small commercial banks did. However, small commercial banks tended to extend more business loans and were more capable of earning interest income from loans than medium and large commercial banks.