Alternative financing and the non-performing loans of the corporate sector in Estonia

Merike Kukk and Natalia Levenko

No wp2020-6, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The paper investigates how much alternative options for corporate financing have affected the quality of domestic corporate bank loans in Estonia. We use quarterly data from 2004Q1�2019Q3 and three different methods to detect the relationship between the non-performing corporate loans of domestic banks and alternative sources of financing for firms. We find that a rise in intra-group borrowing from parent companies is associated with an increase in overdue corporate loans. There is also some evidence that foreign bank loans and trade credit might be positively related to non-performing corporate loans. The results suggest that a broader set of sources of corporate financing beyond domestic bank loans should be considered when assessing the dynamics of the overdue corporate loans of the domestic banking sector.

Keywords: corporate debt; non-performing loans; alternative financing; Bayesian model averaging; local projection method (search for similar items in EconPapers)
JEL-codes: C11 C14 G32 G34 (search for similar items in EconPapers)
Date: 2021-04-08, Revised 2021-04-08
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-cis, nep-fdg and nep-tra
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