The effect of credit risk and banks' specific drivers on banks' performance in light of COVID-19 pandemic: evidence from commercial banks in the UAE

Abstract

The COVID-19 pandemic has induced a series of credit risk problems for most commercial banks in the Gulf Cooperation Council region. The study aims to examine the impact of both credit risk and bank-specific drivers on commercial banks' financial performance in the UAE using panel data with a fixed effect model on a sample of ten commercial banks over ten years from 2012-2021. The findings revealed a negative association between credit risk and financial performance while COVID-19 negatively affects financial performance. The management efficiency and banks' liquidity, which measures banks' specific drivers, are found to have a negative relationship with financial performance while capital adequacy and bank size are found to have a positive relationship with financial performance. This study contributes to the knowledge gaps on credit risk and banks' performance during the financial crisis nexus and provides valuable information to regulators and bankers.