Financial Distress, Moral Hazard Aspects and NPL Formation Under a Long-Lasting Recession: Empirical Evidence from the Greek Crisis

Panayotis Kapopoulos (), Efthymios Argyropoulos and Kalliopi-Maria Zekente
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Efthymios Argyropoulos: Alpha Bank
Kalliopi-Maria Zekente: Alpha Bank

Chapter 11 in Non-Performing Loans and Resolving Private Sector Insolvency, 2017, pp 255-274 from Palgrave Macmillan

Abstract: Abstract Given that the case of Greece may be viewed as an ideal laboratory to study both recession-induced effects and moral hazard aspects, the study focuses on jointly exploring the effects upon the formation of non-performing loans arising from either the inability or the “unwillingness to pay” behavior of obligors. It employs Vector Autoregression (VAR) and Vector Error Correction (VEC) techniques using aggregate macro data along with features of the legal and regulatory framework as the temporary suspension of foreclosures to capture the aforementioned determinants. The results suggest evidence that the unprecedented NPL formation was determined by the severe increase in unemployment, the recessionary shocks reflected in the time path of GDP, as well as some micro-behavioral impact related to strategic and tactical default. Also, business NPL is the most responsive to the phase of the cycle.

Keywords: Non-performing loans; Greek banking system; Financial distress; Micro-behavioral characteristics; Moral hazard; Strategic default (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-50313-4_11

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DOI: 10.1007/978-3-319-50313-4_11

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