Determinants of credit risk in Palestine: Panel data estimation

This manuscript examines the influence of macroeconomic and bank-specific factors on credit quality in Palestine over the last decade. For this purpose, empirical tests are conducted using panel dataset of the fixed and random effects estimates form the period of 2007 to 2018. The results of fixed effects show ample evidence of significant impact from interest, profitability and credit supply to credit default when financial crisis in included in the panel data analysis. As result, interest and credit supply positively impact nonperforming loans (NPLs) with statistical significance, while profitability has significant negative affiliation with NPLs. It also found that Palestinian commercial banks are able to cushion their NPLs during and after the global crisis. The novelty of this research provides a good knowledge in credit quality and risk control. Therefore, it can help in understanding the underlying causes of credit risk in this country and empower the commercial banks to sustain their competitive environment. Hence, it could be of considerable use to the monetary authorities to control credit default and protect Palestinian banks from financial distress.