The dynamic effects of non-performing loans on banks’ cost of capital and lending supply in the Eurozone
Gabriella Chiesa () and
José Manuel Mansilla-Fernández ()
Additional contact information
José Manuel Mansilla-Fernández: Public University of Navarre
Empirica, 2021, vol. 48, issue 2, No 6, 397-427
Abstract This paper analyses the transmission channel from non-performing loans to the cost of capital, credit provision and liquidity creation in the banks of the Eurozone. The empirical results suggest that holdings of non-performing loans increase both the long- and short-term cost of capital for banks. Moreover, the less capitalized the bank, the greater the reduction in credit provision and liquidity creation due to the increased cost of capital. This phenomenon is found to be more economically significant for European periphery country banks than for core country banks. The identification of the transmission channel is robust to the Granger predictability test.
Keywords: Cost of capital; Credit supply; Liquidity creation; NPLs; Sovereign debt crisis (search for similar items in EconPapers)
JEL-codes: G11 G21 G32 H63 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10663-020-09475-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:empiri:v:48:y:2021:i:2:d:10.1007_s10663-020-09475-5
Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663
Access Statistics for this article
Empirica is currently edited by Fritz Breuss and Fritz Breuss
More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().