Determinants of Non-Performing Loans: The Case of Eurozone

  • Vasiliki Makri University of Patras, Department of Business Administration, Greece
  • Athanasios Tsagkanos University of Patras, Department of Business Administration, Greece
  • Athanasios Bellas University of Patras, Department of Business Administration, Greece

Abstract

The purpose of the present study is to identify the factors affecting the non-performing loans rate (NPL) of Eurozone’s banking systems for the period 2000-2008, just before the beginning of the recession. In our days, Eurozone is in the middle of an unprecedented financial crisis, calling into question the soundness of the banking systems of European countries. Looking at both macro-variables (e.g. annual percentage growth rate of gross domestic product, public debt as % of gross domestic product, unemployment) and micro-variables (e.g. loans to deposits ratio, return on assets, return on equity), we investigate which factors determine NPL on aggregate level. Overall, our findings reveal strong correlations between NPL and various macroeconomic (public debt, unemployment, annual percentage growth rate of gross domestic product) and bank-specific (capital adequacy ratio, rate of non-performing loans of the previous year and return on equity) factors.


Key words: Non-performing loans, Bank specific variables, Macroeconomic variables, GMM difference.
JEL: C23, G21

How to Cite
Makri V., Tsagkanos A., & Bellas A. (2014). Determinants of Non-Performing Loans: The Case of Eurozone. Panoeconomicus, 61(2), 193-206. doi:10.2298/PAN1402193M
Section
Original scientific paper