Determinants of Commercial Banks’ Lending Behavior in South Africa

This study is carried out to investigate the factors that determine commercial banks’ lending behavior in South Africa. The model used for this study is summarized in South African commercial banks loans to total assets as the dependent variable and other predictor variables such as credit risk, equity risk, liquidity risk, management efficiency, and GDP growth for the period: 2007-2014. Using the panel data model and regression analysis, this research investigates if any relationship exists between the dependent variable and the specified independent variables. Also, it investigates the significant effect of these independent variables to the South African commercial banks’ lending decisions. This study discovered that the predictor bank specific and macroeconomic variables used were significant at alpha level 1% and 10% and influences banks’ lending behavior. In addition, credit risk, equity risk and management efficiency all have a positive significant influence whilst GDP growth and liquidity risk both have a negative significant impact on commercial banks’ decision to lend in South Africa. Keywords: Commercial banks, credit risk ratio, determinants of commercial banks’ lending, GDP growth, South Africa.