Key Factors of Non-Performing Loans in Baltic and Scandinavian Countries: Lessons Learned in the Last Decade

Kupčinskas, Kazys; Paškevičius, Arvydas

doi:10.15388/ekon.2017.2.10994

Cited by 7 publications

(5 citation statements)

References 5 publications

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“…Evidently, inflation, which other authors did not consider, was observed to be a significant determinant impacting-on non-performing loans.Their findings show that inflation has a significantly negative relationship with nonperforming loans, thereby implying that during high inflation periods, the real burden of loan repayments decreases. In broad terms it means, that people are more likely to honor their obligations in the loan contract.Some authors segmented the non-performing loans between macro-variables and banking related variables,Kupčinskas and Paškevičius (2017). Findings here…”

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confidence: 89%

The Impact of Non-Performing Loans on the Profitability of Listed Euro-Mediterranean Commercial Banks*

Psaila¹,

Spiteri²,

Grima³

2019

IJEBA

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Purpose: To analyze the impact of NPLs on listed commercial bank's profitability, in particular their ROA (Return on Assets), in the Euro-Mediterranean area. We aim to determine whether the change in the level of NPLs in listed commercial banks is either positively or negatively impacting the ROA of the concerned banks. Furthermore, knowing that the liquidity and the solvency of a bank are both equally important to maintain a robust financial position, a Liquidity (LQDT) and Solvency (SLVT) ratio were considered to help explain the variances with NPLs and ROA. Design/Methodology/Approach: We adopted a purposive research design using panel data (2013-2017) from data published on Thomson Reuters Eikon or annual reports of the 35 listed commercial banks in the Euro-Mediterranean region. We used descriptive statistics and four regression models, namely; the Pooled OLS regression model, Fixed Effects (FE), Random Effects (RE) and the Arellano-Bond (AB), through STATA/IC 15.1. Findings: Findings show that there is a negative impact of NPLs on ROA, indicating that problematic loans negatively impact listed commercial bank's profitability in the Euro-Mediterranean region. Also, it was indicated that the Solvency ratio (SLVT) is the only controlling factor that can significantly explain variances within NPLs and ROA. Practical Implications: These results carry with them significant consequences for the bank's financial stability within the Euro-Mediterranean countries and the role of the risk management function of listed commercial banks.

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confidence: 89%

The Impact of Non-Performing Loans on the Profitability of Listed Euro-Mediterranean Commercial Banks*

Psaila¹,

Spiteri²,

Grima³

2019

IJEBA

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“…In the same year, Kupcinskas [15] examined the factors influencing NPLs in the Baltic and Nordic countries from 1998 to 2014. This research was conducted because during the global financial crisis from 2007 to 2008, increased NPL occurred in these countries.…”

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confidence: 99%

“…Banks with high profitability showed an ability to create income, so they were less involved in offering risky loans [14]. Previous studies have shown that when ROA decreases, banks start investing in highrisk projects so that the level of NPL increases [9,[15][16][17][18]. The significant negative impact of ROA on non-performing loans shows that risk-taking is reduced in banks that show a high level of performance.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

Hamdillah¹,

Purwanto²,

Ermawati³

2021

Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bo

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The number of Rural Banks in Indonesia continued to decrease during 2015-2019, even when its assets increase positively. Credit is the primary source of income for rural banks, so most assets are placed in lending. However, growth in lending was followed by higher growth in problematic lending so that the level of Non-Performing Loans (NPLs) continued to increase and exceeded the maximum limit set by Bank Indonesia. It indicates that Rural Banks has not worked optimally in Indonesia, especially in facing the credit risks. This study aimed to analyze the effect of assets qualities consisting of total assets and earning assets quality and financial performance consisting of productivity, efficiency, and profitability on NPL over the 2015-2019 periods. This research used secondary data that is a financial report publication published by Otoritas Jasa Keuangan. Research's sample used 320 Rural Banks all over Indonesia selected by purposive sampling method. The data were analyzed with regression data panel. The results showed that total assets did not affect NPL. Earning assets quality had a positive effect on NPL, while productivity, efficiency, and profitability negatively affected NPL.

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“…The first and foremost drawback is that there are high chances that the model is subjected to a degree of endogeneity. There is evidence that economic growth is one of the main determinants of NPL (109,(118)(119)(120) . Hence, there could exist reverse causality and simultaneity affecting the results of the model.…”

Section: Conclusion and Remarksmentioning

confidence: 99%

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

SenGupta¹

2020

IJED

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Objective: To empirically analyze the link between nonperforming loans and investments along with the role of political governance. The estimation technique used is the fixed effects model including both the country and timMethods: e fixed effects. The dataset consists a panel of 103 countries with annual data over the period from 2000 to 2017. A unique composite political governance index has been prepared combining the six existing governance indicators via Principal Component Analysis (PCA). Findings: It is found that NPL has significant negative impact whereas, governance has significant positive impact on investments as per expectations. However, it is found that the negative impact of NPL on investment gets stronger in presence of good governance. This is a paradoxical result and further attempts has been made to rationalize the outcome. Applications: The study empirically proves the theory of negative impacts of NPL on investment in the economy. Furthermore, the role of political governance has been scrutinized. No prior works have been carried out on this topic. The paradoxical result in this study has opened up new areas for research. An extensive literature review has been provided along with a detailed discussion on the possible measures to tackle with the problems. JEL Classification: C3, E6, G0. Keywords: NPL; investment; political governance institutions; fixed effects model; composite political governance index

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Key Factors of Non-Performing Loans in Baltic and Scandinavian Countries: Lessons Learned in the Last Decade

Abstract: Abstract. A cross-country panel data regression was performed for non-performing loans (NPL) in Denmark, Estonia, Finland, Latvia, Lithuania and Sweden covering a period of years 1998-2014

Cited by 7 publications

References 5 publications

The Impact of Non-Performing Loans on the Profitability of Listed Euro-Mediterranean Commercial Banks*

The Impact of Non-Performing Loans on the Profitability of Listed Euro-Mediterranean Commercial Banks*

The Effect of Asset Quality and Financial Performance on Non Performing Loans (NPLs) of Rural Banks in Indonesia

An empirical analysis on the impact of non-performing loans on investment and economic growth and the role of political governance

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