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Determinants of nonperforming loans after recapitalization in the Nigerian banking industry: Does efficiency matter?

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  • Segun Thompson Bolarinwa
  • Olawale Akinyele
  • Xuan Vinh Vo

Abstract

We examine the intertemporal relationship between nonperforming loans, efficiency and bank recapitalization in the Nigerian banking industry between 2011 and 2018. Using system generalized method of moments (SGMM) and stochastic frontier analysis (SFA), we document the importance of bank efficiency for addressing escalating nonperforming loans in the industry after recapitalization policies and the channels pass‐through between efficiency and the nonperforming loans‐recapitalization nexus. Our results validate the roles of firm‐level and macroeconomic variables: bank size, efficiency, profitability, capitalization, economic growth, inflation, and money supply for addressing nonperforming loans. Also, efficiency passes through recapitalization and bank size to address nonperforming loans. We recommend prudential policies for managerial and profit efficiency and lend supports for CBN's new round of recapitalization policy to address escalating nonperforming loans in the industry.

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  • 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.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:6:p:1509-1524
    DOI: 10.1002/mde.3323
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