Disentangling the transmission channel NPLs-cost of capital-lending supply
Gabriella Chiesa () and
Applied Economics Letters, 2019, vol. 26, issue 16, 1333-1338
This paper analyses the effects of non-performing loans (NPLs) on the cost of capital, and on lending and liquidity supply, for a sample of 225 Eurozone banks over the period 2002Q1-2016Q4. Our results demonstrate that NPLs increase the cost of capital, which reduces both lending supply and liquidity creation. This phenomenon is comparatively more significant for periphery county banks than for core country banks.
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