The dynamic effects of non-performing loans on banks’ cost of capital and lending supply in the Eurozone

Chiesa, Gabriella; Fernández, José Manuel Mansilla

doi:10.1007/s10663-020-09475-5

Cited by 6 publications

(3 citation statements)

References 51 publications

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“…Between the two considered bank-specific determinants a trade-off needs to be made because the reduction of NPL levels results in an increase in a bank's operating costs [32], which leads to an increase of the cost-to-income ratio.…”

Section: Literature Reviewmentioning

confidence: 99%

Modelling Profitability Determinants in the Banking Sector: The Case of the Eurozone

Mirović,

Kalaš,

Milenković

et al. 2024

Mathematics

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The aim of this study is to analyze which factors affect the profitability of banks in the eurozone and to make recommendations for supporting them to achieve higher levels of profitability in particular eurozone countries. The banks operating in the eurozone are specific that they are under one monetary policy. The main purpose of the banks’ profitability analysis is to identify main bank-specific and macroeconomic determinants and help bank management to more fully comprehend their importance of bank-specific determinants and macroeconomic determinants’ influence when measuring and evaluating bank profitability. For the purpose of this research, we analyze the impact of bank-specific determinants (NPL, CIR, NIM, NIF and NIT) and macroeconomic determinants (GDP, INF, UNM and DEBT) on bank profitability in the eurozone for the period of 2015–2020 using a random effects model, fixed effects model, and the general method of moments (GMM). This empirical research analyzed quarterly data series from Eurostat for eighteen countries in the eurozone. We came to the results that on the eurozone-level NPL, the cost-to-income ratio has a negative impact on the banks’ profitability, while the net interest income to the operating income, the net income for trading assets to the operating income and the net fee and commission income to the operating income have a positive impact on the banks’ profitability. Considering the macroeconomic variables, we found a positive impact only in the case of GDP, while the inflation rate, unemployment rate and gross government debt have shown a negative impact on the banks’ profitability. The main contribution of this study implies different panel techniques with two uncommonly used macroeconomic variables such as the unemployment rate and debt ratio. The results on the country level differ from country to country and these findings can give a lead to policy makers on the national level on how to enhance the banks’ profitability levels.

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Section: Literature Reviewmentioning

confidence: 99%

Modelling Profitability Determinants in the Banking Sector: The Case of the Eurozone

Mirović,

Kalaš,

Milenković

et al. 2024

Mathematics

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“…The equity capital can be used to write off the non-performing loans. Also, the study by Chiesa and Mansilla-Fernandez (2020) shows that non-performing loans (bad loans) increase both short-term and long-term cost of capital. In summary, we consider equity capital as bank output because this is one of the discretionary variables that can control bank stability.…”

Section: Datasetmentioning

confidence: 99%

Implementing strategic disposability for performance evaluation: Innovation, stability, profitability and corporate social responsibility in Chinese banking

Fukuyama

Tan

2022

European Journal of Operational Research

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“…2020 ), which might harm banks’ balance sheets. As a result, banks might face rising financing costs that would reduce credit availability to the real sector (Chiesa and Mansilla-Fernández 2019 , 2021 ; Li et al. 2020 ).…”

Section: Introductionmentioning

confidence: 99%

Working capital management, financial constraints and exports: evidence from European and US manufacturers

Mansilla-Fernández

Baleix

2022

Empir Econ

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This paper investigates the effect of firms’ working capital management, measured by the cash conversion cycle (CCC) on exports, on both the intensive and extensive margins. By using Heckman’s two-stage model for the treatment of sample selection bias, we find that the longer the CCC, the lower firms’ likelihood of exporting and the lower the volume of their exports. This phenomenon is economically more relevant for financially constrained firms than for unconstrained firms. The results are robust to the propensity score matching, the transition sample and the placebo analyses. Finally, these results can be extrapolated in the context of the COVID-19 crisis because of the decline in trading conditions and firms’ shortage of liquidity.

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The dynamic effects of non-performing loans on banks’ cost of capital and lending supply in the Eurozone

Cited by 6 publications

References 51 publications

Modelling Profitability Determinants in the Banking Sector: The Case of the Eurozone

Modelling Profitability Determinants in the Banking Sector: The Case of the Eurozone

Implementing strategic disposability for performance evaluation: Innovation, stability, profitability and corporate social responsibility in Chinese banking

Working capital management, financial constraints and exports: evidence from European and US manufacturers

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