Empirical Analysis of Commercial Banks' Loans in Cambodia: Panel Data Models

The aim of this research is to employ three distinct panel models, specifically Pooled OLS, Fixed Effect, and Random Effect models, in order to investigate the impact of the five components of banks' risk rating, referred to as CAMEL, on the loan growth rate of commercial banks. The measurement of these components included the equity to asset ratio for capital adequacy (C), the non-performing loan to loan ratio for asset quality (A), the operating expense to asset ratio for management capability (M), the return on asset for earning quality (E), and the liquid asset to asset ratio for liquidity (L). Furthermore, each model took into account two macroeconomic indicators, specifically the real GDP growth and the growth rate of money supply measured by broad money (M2), as control variables. Over a span of 12 years, from 2011 to 2022, a total of 22 commercial banks were carefully chosen. The results of the Fixed Effect test suggest that the FE model is more suitable when compared to the Pooled OLS model. However, the Hausman test indicates that the RE model is more appropriate than the FE model. The findings of this study revealed that the quality of assets played a highly significant role in determining the rate of loan growth. The slope coefficient in all three models was found to be statistically significant at a 5% level. Additionally, the management capability and earning quality were also found to have a statistically significant impact on the loan growth rate. Furthermore, the growth rate of real GDP was found to statistically influence the loan growth rate, whereas the impact of broad money on the loan growth rate was found to be statistically insignificant.