Macroeconomic Factors of Non-Performing Loans in Commercial Banks

Mileris, Ričardas

doi:10.15388/ekon.2014.0.3024

Cited by 19 publications

(12 citation statements)

References 13 publications

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“…Efficient trade policy is believed to improve the financial position of the corporate firms causing an overall economic growth of the nation. The studies by Clichici and Colesnicova (2014) in Moldova and Mileris (2014) in Lithuania suggested the need to raise exports to reduce credit risk, which indicates that export is negatively related to the NPL level.…”

Section: Macroeconomic Variablesmentioning

confidence: 99%

Macroeconomic determinants of credit risks: evidence from high-income countries

Koju

Wang

2019

EJMBE

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Purpose The purpose of this paper is to empirically assess the significant indicators of macroeconomic environment that influence credit risk in high-income countries. Design/methodology/approach The study employs the system generalized method of moments estimator to avoid the dynamic panel bias and endogeneity issues. Different indices of economic growth are used in each model in order to find the most significant proxy of the economic cycle that influences problem loans. The analysis is carried out using a sample of 49 developed countries covering a 16-year period (2000–2015). Findings The overall empirical results highlight that the development of industrial sectors and exports are the main drivers of loan performance in high-income countries. The findings specifically recommend adopting an expansionary fiscal policy to boost per capita income and potential productivity for the safety of the banking system. Practical implications The findings have direct practical applicability for stabilizing the financial system. The study recommends the government to increase the productivity of export-oriented industries in order to boost employment and increase the payment obligations of individuals and business firms. More importantly, it highlights the essentiality of perfect economic policy to control default risks. Originality/value To the best of the authors’ knowledge, this is the first empirical study that compares the relative effect of three alternative proxies of the economic cycle on credit risk and identifies the most significant proxy. The current study also empirically shows that industrial development could be one of the crucial factors to improve financial health in developed countries.

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Section: Macroeconomic Variablesmentioning

confidence: 99%

Macroeconomic determinants of credit risks: evidence from high-income countries

Koju

Wang

2019

EJMBE

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“…The country's NPLs led to stagnation of economic resources and activity together with threats to macroeconomic stability (RBZ, 2015). It was also observed that banks are an integral part of the financial system and play a fundamental role in the global economy and therefore NPLs did affect the whole economy of a country (Mileris, 2014). Dollarization has been noted to bring about some positive and negative effects on the economy of a country, which are to be elaborated in this paper.…”

Section: Literature Reviewmentioning

confidence: 82%

The Costs and Benefits That Developing Countries Could Draw From Dollarization: The Zimbabwean Experience Period 2009-2018

Matanda¹

2018

JMAA

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The paper presents and examines the impact of dollarization on growth and development of emerging economies with specific reference to Zimbabwe's experience in the period, 2009-2018. The research study explores the theoretical and empirical evidence drawn from countries of the world that dollarized for various economic reasons.The study used a descriptive survey design to analyse the research data drawn from the field on the impact of dollarization on economic growth and development prospects of dollarized emerging economies. It was found out that dollarization was essential in reducing high inflation and unemployment rates to acceptable levels, increased aggregate supply and demand, the gross domestic product (GDP), and living standards of the citizens of developing nations. The study concluded that dollarization contributed significantly to the growth and development of most emerging economies of the world. It was therefore recommended that emerging economies such as Zimbabwe should rationally and effectively dollarize in their desire to attain all the millennium development goals (MDGs), and drive towards elimination of dependence on rich nations, self-reliance, and sustainable development.

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“…Macroeconomic factors have an immense impact on the profitability of banks because these factors are not in the control of banks and management due to their impact at the macro level, so they influence the different levels of growth according to the size and nature of bank. Deterioration in the economic condition of a country reduces the debtor's ability for repayments because it decreases the per capita income (Mileris, 2014). Inflation is also assessed as the significant macroeconomic determinant of nonperforming loans, although its relation is inconclusive.…”

Section: Literature Reviewmentioning

confidence: 99%

Macroeconomic and Idiosyncratic Factors of Non-Performing Loans: Evidence from Pakistan’s Banking Sector

Ashraf

Butt

2019

J. financ. account. res.

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Using panel data approach in the Pakistan banking sector over the period 2010 to 2016, we examine the bank-specific and macroeconomic determinants of non-performing loans. We use quantitative research design with OLS random effect model. Furthermore, we use various regression and correlation analysis in this study. We find that rise in capital adequacy ratio, bank size, GDP growth rate, and inflation, reduces the non-performing loans (NPL) ratio. Our results also show that a rise in loan loss provisions enhances the NPL ratio. Our results suggest that banks with poor asset-quality can sabotage the growth of fiscal as well as the economic sector. Outcomes of the study emphasis on the need to clear-out the NPLs to keep financial sector sound. NPLs can cause high loan loss provisions which affect the capitalization of banks that ultimately impacts fiscal and economic growth. Bank supervisory agencies should therefore pay attention to monitory and macroeconomic policies of the banks. This study examines the impact of idiosyncratic and macroeconomic determinants of non-performing loans on banks’ asset quality using recent data from 2010 to 2016, the time period when major banking sector reforms were launched.

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Macroeconomic Factors of Non-Performing Loans in Commercial Banks

Cited by 19 publications

References 13 publications

Macroeconomic determinants of credit risks: evidence from high-income countries

Macroeconomic determinants of credit risks: evidence from high-income countries

The Costs and Benefits That Developing Countries Could Draw From Dollarization: The Zimbabwean Experience Period 2009-2018

Macroeconomic and Idiosyncratic Factors of Non-Performing Loans: Evidence from Pakistan’s Banking Sector

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