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The Determinants of Nonperforming Loans Before and After the Crisis: Challenges and Policy Implications for Turkish Banks

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  • Vuslat Us

Abstract

This article examines the determinants of nonperforming loans (NPLs) in the Turkish banking sector via panel data estimation techniques. In order to see the effect of the global crisis and whether this effect changes across ownership, the analysis is conducted in subperiods covering the precrisis and the postcrisis periods and estimations are repeated by an ownership breakdown. Findings show that the determinants of NPLs have changed, and macroeconomic and policy-related determinants have higher significance after the crisis. Accordingly, strong economic activity and sound fiscal policy improve loan quality, while higher policy rate induces NPLs. Meanwhile, the significance of bank-specific determinants depends on ownership. Yet, a common theme applies suggesting that asset size should grow in favor of loans, but this should be backed with efficient loan monitoring, while capital adequacy is stringent enough to limit NPLs.

Suggested Citation

  • Vuslat Us, 2018. "The Determinants of Nonperforming Loans Before and After the Crisis: Challenges and Policy Implications for Turkish Banks," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(7), pages 1608-1622, May.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:7:p:1608-1622
    DOI: 10.1080/1540496X.2017.1315334
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    Cited by:

    1. Segun Thompson Bolarinwa & Richard Olaolu Olayeni & Xuan Vinh Vo, 2021. "Is there a nonlinear relationship between nonperforming loans and bank profitability? Evidence from dynamic panel threshold," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 649-661, April.
    2. Segun Thompson Bolarinwa & Olawale Akinyele & Xuan Vinh Vo, 2021. "Determinants of nonperforming loans after recapitalization in the Nigerian banking industry: Does efficiency matter?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1509-1524, September.
    3. Karadima, Maria & Louri, Helen, 2021. "Determinants of non-performing loans in Greece: the intricate role of fiscal expansion," LSE Research Online Documents on Economics 110741, London School of Economics and Political Science, LSE Library.
    4. Segun Thompson Bolarinwa & Anthony Enisan Akinlo, 2022. "Determinants of nonperforming loans after recapitalization in the Nigerian banking industry: Does competition matter?," African Development Review, African Development Bank, vol. 34(3), pages 309-323, September.
    5. Rahbar , Farhad & Behzadi Soufiani , Mohsen, 2021. "The Impact of Macroeconomic and Banking Variables on Non-Performing Loans in Oil Cycles: Evidence from Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 16(2), pages 135-164, June.

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