Macroeconomic and bank-specific determinants of non-performing loans: the case of baltic states

Jordan Kjosevski () and Mihail Petkovski
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Jordan Kjosevski: Silk Road Bank
Mihail Petkovski: University Ss. Cyril and Methodius

Empirica, 2021, vol. 48, issue 4, No 7, 1009-1028

Abstract: Abstract This study examines selected macroeconomic and bank-specific determinants of non-performing loans (NPLR) for a panel of 21commercial banks from the Baltics States (Estonia, Latvia and Lithuania), using annual data for the period 2005–2016. To avoid the risk of providing unconsistent and biased results by using only one estimation technique, in our study we implemented three alternative estimation models (fixed- effects model, difference Generalized Method of Moments and system Generalized Method of Moments). Empirical results provide evidence that the most important macroeconomic factors influencing NPLR are growth of GDP, public debt, inflation and unemployment. As for the bank-specific determinants, we found that equity to total assets ratio, return on assets, return on equity and growth of gross loans have an impact on the amount of NPLR.

Keywords: Non-performing loans; Macroeconomic determinants; Bank-specific determinants; Baltic states; System generalized method of moments (search for similar items in EconPapers)
JEL-codes: F61 F62 G01 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10663-020-09491-5

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