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Benchmarking non-performing loans

Cerulli, Giovanni and D’Apice, Vincenzo and Fiordelisi, Franco and Masala, Francesco (2020) 'Benchmarking non-performing loans.' The European Journal of Finance, 26 (16). pp. 1591-1605. ISSN 1351-847X

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Abstract

This paper provides a new perspective to evaluate the economic role played by banks in non-performing loans (NPLs) accumulation. We estimate benchmark NPL levels on the judicial inefficiency dimension, controlling for country- and bank-specific factors. To this aim, we first empirically establish whether judicial inefficiency is a key determinant of NPLs in the European banking system for the period 2006–2017. Using the dynamic-Generalized Method of Moments estimations, we show that higher contract enforcement inefficiency increases NPLs. Then, we estimate NPLs benchmark levels using a dose response function based on judicial inefficiency. Our results show that Norway, Sweden, and Italy performed better than the European countries, while Austria, Germany, Spain, Ireland, Cyprus, and Greece performed worse than the European mean. Our results have several policy implications.

Item Type: Article
Uncontrolled Keywords: Non-performing loans, European banking financial stability, benchmarking
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 02 Sep 2020 11:25
Last Modified: 01 Mar 2022 02:00
URI: http://repository.essex.ac.uk/id/eprint/28613

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