Abstract:

Credit management is the collection and monitoring of consumer payments. To reduce the quantity of money held in debtors, a credit management system should be used. Credit management is critical to a company's ability to maintain a steady flow of cash. Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write Off are all regarded independent variables in the development of five assumptions for the deposit bank's performance. Fourteen commercial banks provided data from the 2014 fiscal year to the 2019 fiscal year using ex-post facto research methods. Using descriptive statistics, correlation, and Ordinary Least Squares Regression, we were able to make sense of the data. A bank's random effect models show that loan loss provisions, non-performing loans, and equity as a percentage of assets all have a substantial impact on its performance. The result is that banks must adopt credit risk management and bad debt management procedures that are up to the task. A global commercial bank's profitability is heavily influenced by the credit risk management indicators discussed here. According to the findings of the empirical study, bank investors and shareholders should be aware of the possibility that management may use provisions for losses on nonperforming loans to smooth earnings. Owners should be ready to meet optimal agency expenses by employing competent internal and external auditors in order to decrease the manager's knowledge asymmetry. Credit risk management and financial performance distinguish commercial banks from all other types of banks in the country's banking system. In the study, credit risk management indicators such as non-performing loans and capital adequacy ratios were found to have an impact on the financial performance of global commercial banks. A commercial bank's financial performance is greatly influenced by its ability to effectively manage credit risk. A sound credit estimation should be implemented in banks before they lend money to customers, and banks should set up effective systems and policies for the management and provision of credit strict by proper monitoring, through complete customer information and their purpose and ability to repay the borrowed funds. Rather than just reducing their exposure to credit risk, banks should develop and implement strategies that boost their competitiveness and overall performance.