Panoeconomicus 2014 Volume 61, Issue 2, Pages: 193-206
https://doi.org/10.2298/PAN1402193M
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Determinants of non-performing loans: The case of Eurozone
Makri Vasiliki (Department of Business Administration, University of Patras, Greece)
Tsagkanos Athanasios (Department of Business Administration, University of Patras, Greece)
Bellas Athanasios (Department of Business Administration, University of Patras, Greece)
The purpose of the present study is to identify the factors affecting the
non-performing loans rate (NPL) of Eurozone’s banking systems for the period
2000-2008, just before the beginning of the recession. In our days, Eurozone
is in the middle of an unprecedented financial crisis, calling into question
the soundness of the banking systems of European countries. Looking at both
macro-variables (e.g. annual percentage growth rate of gross domestic
product, public debt as % of gross domestic product, unemployment) and
micro-variables (e.g. loans to deposits ratio, return on assets, return on
equity), we investigate which factors determine NPL on aggregate level.
Overall, our findings reveal strong correlations between NPL and various
macroeconomic (public debt, unemployment, annual percentage growth rate of
gross domestic product) and bank-specific (capital adequacy ratio, rate of
nonperforming loans of the previous year and return on equity) factors.
Keywords: non-performing loans, bank specific variables, macroeconomic variables, GMM difference