The association between human capital efficiency and credit risk of Indian banks: a change point analysis

The aim of this paper is to identify the structural break in the distribution of credit risk in Indian banking sector and highlight the importance of human capital in managing credit risk during pre- and post-change period after controlling the influence of bank specific and macroeconomic factors. The study is based on secondary data of listed Indian commercial banks over a period of 15 years from 1999-2000 to 2013-2014. Change point analysis is used to identify structural break in the credit risk. Human capital efficiency (HCE) is measured by employing VAIC™ model. The panel data regression results for pre-change period reveal no significant association between HCE and credit risk. However, in post-change period, a negative impact of HCE on credit risk is observed. This paper is helpful for policy implications as the results demonstrate that banks can reduce credit risk by enhancing the efficiency of human resources.