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Financial Distress, Moral Hazard Aspects and NPL Formation Under a Long-Lasting Recession: Empirical Evidence from the Greek Crisis

In: Non-Performing Loans and Resolving Private Sector Insolvency

Author

Listed:
  • Panayotis Kapopoulos

    (Alpha Bank)

  • Efthymios Argyropoulos

    (Alpha Bank)

  • Kalliopi-Maria Zekente

    (Alpha Bank)

Abstract

Given that the case of Greece may be viewed as an ideal laboratory to study both recession-induced effects and moral hazard aspects, the study focuses on jointly exploring the effects upon the formation of non-performing loans arising from either the inability or the “unwillingness to pay” behavior of obligors. It employs Vector Autoregression (VAR) and Vector Error Correction (VEC) techniques using aggregate macro data along with features of the legal and regulatory framework as the temporary suspension of foreclosures to capture the aforementioned determinants. The results suggest evidence that the unprecedented NPL formation was determined by the severe increase in unemployment, the recessionary shocks reflected in the time path of GDP, as well as some micro-behavioral impact related to strategic and tactical default. Also, business NPL is the most responsive to the phase of the cycle.

Suggested Citation

  • Panayotis Kapopoulos & Efthymios Argyropoulos & Kalliopi-Maria Zekente, 2017. "Financial Distress, Moral Hazard Aspects and NPL Formation Under a Long-Lasting Recession: Empirical Evidence from the Greek Crisis," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Platon Monokroussos & Christos Gortsos (ed.), Non-Performing Loans and Resolving Private Sector Insolvency, chapter 11, pages 255-274, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-50313-4_11
    DOI: 10.1007/978-3-319-50313-4_11
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    Cited by:

    1. Anastasiou, Dimitrios & Kapopoulos, Panayotis, 2021. "Dynamic linkages among financial stability, house prices and residential investment in Greece," MPRA Paper 107833, University Library of Munich, Germany.

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