Economic policy uncertainty and non-performing loans: The moderating role of bank concentration

Maria Karadima and Helen Louri

Finance Research Letters, 2021, vol. 38, issue C

Abstract: Following the financial and debt crises in the euro area and the delays in formulating a cohesive policy response, banks faced serious problems with the increase in non-performing loans (NPLs) being the most threatening. Economic policy uncertainty (EPU) has often been blamed for initiating and propagating NPLs. In this study, we attempt to estimate empirically if EPU has a significant effect on NPLs and if this effect can be restrained by another legacy of the crisis, namely bank concentration. By employing a panel dataset of 507 banks from four major euro area countries (France, Germany, Italy and Spain) during the period 2005–2017, we find that EPU has a positive impact on NPLs but this impact is significantly moderated by higher bank concentration.

Keywords: Non-performing loans; Economic policy uncertainty; Bank concentration (search for similar items in EconPapers)
JEL-codes: C23 D80 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312802

DOI: 10.1016/j.frl.2020.101458

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