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Non-performing loans and bank lending behaviour

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Abstract

This article empirically investigates whether the level of non-performing loans (NPLs) affects the bank lending behaviour using the bank-level data across 42 countries, spanning over the period from 2000 to 2017. We find a negative and statistically significant relationship between NPL and bank loan growth. This impact is not geographically restricted and is confirmed for the EU, non-EU, advanced, and emerging countries subsamples. We also examine the channels through which NPLs affect loan growth. Our results show that the association between NPL and loan growth is more pronounced for well-capitalized banks. We find no evidence in support of an effect of asset management companies on the negative association between NPLs and loan growth. In addition, our results are robust with respect to alternative measure of credit risk and different specifications.

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Notes

  1. The impact of NPL on growth lending in the fixed effect model is 0.0027, see Table 4.

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Funding

Funding was provided by Javna Agencija za Raziskovalno Dejavnost RS (Grant No. P5-0161) and Erasmus Mundus project Green Tech WB (Grant No. 551984-EM-1-2014-1-ES-ERA MUNDUS-EMA2).

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Authors and Affiliations

  1. School of Economics and Business, University of Ljubljana, Kardeljeva Pl.17, 1000, Ljubljana, Slovenia

    Ardit Gjeçi, Matej Marinč & Vasja Rant

  2. University of New York Tirana, Kodra e Diellit, 1046, Tirana, Albania

    Ardit Gjeçi

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  1. Ardit Gjeçi
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  2. Matej Marinč
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Correspondence to Vasja Rant.

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Appendix

Appendix

See Tables 9 and 10.

Table 9 Definitions and data sources of variables
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Table 10 Number of banks and observations used in the study, 2000–2017
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Gjeçi, A., Marinč, M. & Rant, V. Non-performing loans and bank lending behaviour. Risk Manag 25, 7 (2023). https://doi.org/10.1057/s41283-022-00111-z

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