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Determinants of Non-Performing Loans: A Panel Data Empirical Analysis for South European Countries

Ghorbani, Tom LU and Jakobsson, Viktor LU (2019) NEKP01 20191
Department of Economics
Abstract
The paper analyzes the determinants of non-performing loans in 19 European banks in Portugal, Italy, Greece and Spain based on quarterly data between 2006–2018. We implement a panel data model with interactive effects, which accounts for unobserved heterogeneity and cross-sectional dependence. The estimation approach we employ uses an analytical and iterative bias correction based on the work of Bai (Panel Data Models with Interactive Fixed Effects, Econometrica, 77, pp. 1229–1279, 2009). To the best of our knowledge, this is the first time such an approach is used to analyze the determinants of non-performing loans, while simultaneously accounting for cross-sectional dependence. The results indicate that the unemployment rate has a... (More)
The paper analyzes the determinants of non-performing loans in 19 European banks in Portugal, Italy, Greece and Spain based on quarterly data between 2006–2018. We implement a panel data model with interactive effects, which accounts for unobserved heterogeneity and cross-sectional dependence. The estimation approach we employ uses an analytical and iterative bias correction based on the work of Bai (Panel Data Models with Interactive Fixed Effects, Econometrica, 77, pp. 1229–1279, 2009). To the best of our knowledge, this is the first time such an approach is used to analyze the determinants of non-performing loans, while simultaneously accounting for cross-sectional dependence. The results indicate that the unemployment rate has a positive relationship with non-performing loans. When investigating bank-specific determinants, this paper finds some evidence suggesting that bank profitability and capitalization has a negative relationship with non-performing loans. (Less)
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author
Ghorbani, Tom LU and Jakobsson, Viktor LU
supervisor
organization
course
NEKP01 20191
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Non-performing loans, Bank-specific determinants, Macroeconomic determinants, Interactive Effects, Cross-sectional dependence
language
English
id
8984222
date added to LUP
2019-08-08 10:25:45
date last changed
2019-08-08 10:25:45
@misc{8984222,
  abstract     = {The paper analyzes the determinants of non-performing loans in 19 European banks in Portugal, Italy, Greece and Spain based on quarterly data between 2006–2018. We implement a panel data model with interactive effects, which accounts for unobserved heterogeneity and cross-sectional dependence. The estimation approach we employ uses an analytical and iterative bias correction based on the work of Bai (Panel Data Models with Interactive Fixed Effects, Econometrica, 77, pp. 1229–1279, 2009). To the best of our knowledge, this is the first time such an approach is used to analyze the determinants of non-performing loans, while simultaneously accounting for cross-sectional dependence. The results indicate that the unemployment rate has a positive relationship with non-performing loans. When investigating bank-specific determinants, this paper finds some evidence suggesting that bank profitability and capitalization has a negative relationship with non-performing loans.},
  author       = {Ghorbani, Tom and Jakobsson, Viktor},
  keyword      = {Non-performing loans,Bank-specific determinants,Macroeconomic determinants,Interactive Effects,Cross-sectional dependence},
  language     = {eng},
  note         = {Student Paper},
  title        = {Determinants of Non-Performing Loans: A Panel Data Empirical Analysis for South European Countries},
  year         = {2019},
}