Abstract:
Banking system plays a vital role for the economic development of Bangladesh. It is
clear that a poor banking system can’t help the economic development in a country. This
study examined the driving factors of financial distress of four state-owned bank using
panel data consisted of ten years through 2015 to 2024.The objective of this study was to
analyze the determinants of four state owned commercial banks in Bangladesh based on
their financial characteristics and identify the determinants of performance exposed by
the financial ratios. In addition, econometric model (multivariate regression analysis) by
formulating a regression model was used to estimate the impact of capital adequacy,
contingent liability, default risk, inflation, liquidity ratio, return on asset, return on equity
on the nonperforming loan of these banks. Capital adequacy, contingent liabilities,
default risk, inflation, liquidity ratio, return on asset and return on equity are taken as
independent variables whereas non-performing loan is used as dependent variable in this
study. The result shows that contingent liability and inflation has strong significant
impact on financial distress on state-owned commercial banks of Bangladesh.
Furthermore, the estimation results reveal that Nonperforming loans are significantly
influenced by capital adequacy ratio, percentage of default loan, liquidity ratio and return
on asset which can lead state-owned commercial banks to financial distress. The study
found that SCBs in Bangladesh are facing financial distress basis on linear regression
model. Therefore, the study suggests the regulatory authorities, including stakeholders
and researchers to considering the findings of the study and to be more alert of the
operations of SCB s in order to steps forward the performance of this sector as well
development of the country in the coming future.
