Non-performing loans and Financial Development: New Evidence

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examine the relationship between non-performing loans (NPLs) and financial (sector) development. The study is motivated by the scant knowledge on how financial development structures impact non-performing loans across banking sectors around the world. In the pooled full country empirical analysis, we find that (i) private credit to GDP ratio is positively associated with non-performing loans, (ii) NPLs are inversely associated with bank efficiency, loan loss coverage, banking competition and banking system stability, and (iii) NPL is positively associated with foreign bank presence, banking crises and bank concentration. We also find that efficient and stable banking sectors experience higher non-performing loans. In the regional empirical analysis, NPLs are negatively associated with regulatory capital ratio and bank liquidity while the graphical analysis show that NPLs are inversely related to financial development and profitability in several regions.

Keywords: Non-performing loans; credit risk; financial development; banking crisis; foreign banks; financial intermediation; banking sector development; efficiency; liquidity; asset quality; bank concentration, banking stability; Sub-saharan Africa; MENA; Europe; Asia-Pacific; Latin America (search for similar items in EconPapers)
JEL-codes: E3 E32 E6 G1 G2 G21 (search for similar items in EconPapers)
Date: 2017-01-02
New Economics Papers: this item is included in nep-ban, nep-eff and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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https://mpra.ub.uni-muenchen.de/80231/1/MPRA_paper_80231.pdf revised version (application/pdf)
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https://mpra.ub.uni-muenchen.de/92338/1/MPRA_paper_90333.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/92476/1/MPRA_paper_90333.pdf revised version (application/pdf)

Related works:
Journal Article: Non-performing loans and financial development: new evidence (2019)
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