Ghadah Nasseif is an assistant professor in the finance department at the College of Business and Administration in the University of Business and Technology, Jeddah, Saudi Arabia. She is also the acting vice dean of academic affairs for the College of Business and Administration, female campus. Since 2005, she has participated and headed many administrative and quality committees at the CBA. She has taught courses in both the accounting and the finance departments.
The challenges facing the Saudi economy are increasing especially with the continuous drops in the oil prices. Therefore, the opportunity now is to focus on the economy diversification and give full attention to the financial institutions. The strength of the financial institutions has always played an important role in the economy. The 2008’s financial crisis has triggered the failure in the practice of risk management. The need to have an effective risk management practice is essential these days for any financial institution. It provides the financial stability needed for banks to survive and to continue running their operations. The Saudi Financial institutions need to adopt proper risk management practices to avoid such financial crisis.
Many studies have analyzed the practices of risk management, but the lack of studies on the credit risk management limits the understanding of the procedures and the practices of credit risk management. Thus, this research study analyzes the credit risk management, and it investigates the impact of the aspects of credit risk management on the credit risk management practice for housing loans. This is achieved through studying the role of two moderators: type of bank and type of ownership. To reach this goal, literature reviews are analyzed and discussed in order to provide enough information about the concept and its outcomes. Primary data is used in the study by a developed scale. Questionnaires are distributed on the credit risk management and the housing loans departments. For further goals, the bank annual reports are used as the secondary data to investigate the impact of credit risk management on the bank performance. They are also used to compare the performance between the different banks in Saudi Arabia. Hypotheses are built and examined through two models. The first model uses the regression analysis by SEM to test the relationship between the aspects of credit risk Management (CRM) and the CRM practice through the role of the two moderators: Type of bank and Type of ownership. The second model uses the multiple regression analysis to test the relationship between the credit risk management and the bank performance. Furthermore, T- Test is used in the comparison between the different banks in Saudi Arabia by analyzing the CAMEL ratios.The results of the research confirm the impact of the aspects of credit risk management on the credit risk management practice. In addition, the results confirm the role of the type of bank and type of ownership in this relationship. Most aspects have greater effect on the credit risk management practice in Islamic and government banks compared to the private and conventional banks. Furthermore, the relationship between the CRM and the bank performance is confirmed. There are significant differences between the banks in terms of some of the performance measurements.This research study provides guidance and directions to the financial institutions and policy makers regarding the credit risk management. Banks can give their full attention to the important ratios and aspects of credit risk to control and monitor them in order to avoid any future risks. Keywords: Risk management, Credit risk management, Housing finance, Islamic and conventional banking, CAMEL model and Bank performance.
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