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Determinants of Nonperforming Loans in Emerging Markets: Evidence from the MENA Region

Author

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  • Imad Jabbouri

    (School of Business Administration, Al Akhawayn University in Ifrane, Hassan II Avenue, 53000 Ifrane, Morocco)

  • Maryem Naili

    (School of Business Administration, Al Akhawayn University in Ifrane, Hassan II Avenue, 53000 Ifrane, Morocco2The Higher Institute of Commerce and Business Administration (Groupe ISCAE), Km 9, 5 Route de Nouasseur, Bp. 8114, Casablanca, Morocco)

Abstract

Credit risk has severe impacts on banks’ performance, leading to financial and economic distress. To highlight this interesting issue, this study explores bank-specific and macroeconomic determinants of banks’ credit risk, denoted by the level of nonperforming loans (NPLs). The study includes 98 banks from 10 Middle East and North African (MENA) emerging countries spanning the period between 2003 and 2016. The analysis employs panel data estimation technique. Our results reveal that bank size, capital adequacy ratio, bank operating efficiency, profitability, GDP growth, unemployment, inflation, and public debt represent the main determinants of NPLs in MENA emerging markets. The results of this research have practical implications for bank managers, regulators, investors, and financial analysts. This study provides significant insights on the determinants of NPLs, which will allow bank managers to design credit policies that minimize borrowers’ defaults. The findings of the study are useful to policy makers to establish new and reinforce existing regulations to maintain the steadiness of the banking sector in MENA emerging countries.

Suggested Citation

  • Imad Jabbouri & Maryem Naili, 2019. "Determinants of Nonperforming Loans in Emerging Markets: Evidence from the MENA Region," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-33, December.
    • Handle: RePEc:wsi:rpbfmp:v:22:y:2019:i:04:n:s0219091519500267
    DOI: 10.1142/S0219091519500267
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    Citations

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    Cited by:

    1. Rimsha Shahid & Rimsha Shahid & Hammad Badar & Aqsa Iftikhar & Sidra Ghulam Muhammad & Dr. Muhammad Navid Iqbal & Zulfiqar Hussain Awan & Faisal Nadeem Shah, 2024. "Influence on Banks' Credit Risk Through Monetary Policy Instruments: A Study of Listed Commercial Banks in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(2), pages 255-265.
    2. Khalil Alnabulsi & Emira Kozarević & Abdelaziz Hakimi, 2023. "Non-Performing Loans as a Driver of Banking Distress: A Systematic Literature Review," Commodities, MDPI, vol. 2(2), pages 1-20, April.

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