 Credit risk pricing and the rationality of lending decision-making within dual banking systems: A parametric approachAwatef Louhichi and Younes Boujelbene Economic Systems, 2020, vol. 44, issue 1 Abstract: The reduction of non-performing loans, and making correct provisions for them, plays a primary role in the management and minimization of banking credit risk. However, these actions depend primarily upon the cost at which banks may dispose of these bad loans. Hence, this study aims to perceive the price of banks’ credit risk via estimating the shadow price of non-performing loans. We assess and compare the perceived price of the credit risk of Islamic and conventional banks operating in 9 countries from the Middle East and Asia, using a quadratic directional distance function. Following this, we evaluate the impact of different settings of directional vectors on shadow prices by conducting a risk-sensitivity analysis. Applying bootstrap regression, the factors affecting NPLs’ prices are further investigated. The paper concludes that the estimation of the shadow prices of bad loans can provide important elements in favor of credit risk management and, therefore, credit risk mitigation. Keywords: Non-performing loans; Directional distance function; Technical efficiency; Shadow price; Risk preferences; Islamic banks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:44:y:2020:i:1:s0939362519300482 DOI: 10.1016/j.ecosys.2019.100740 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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