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How Bank Managers Anticipate Non-Performing Loans Evidence from Europe, US, Asia and Africa

Applied Finance and Accounting

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Title How Bank Managers Anticipate Non-Performing Loans Evidence from Europe, US, Asia and Africa
 
Creator Ozili, P. K.
 
Description This study extends the literature on the determinants of NPL. I investigate whether banks anticipate non-performing loans by making balance sheet adjustments. This study draws insight into the actions taken by credit risk management teams and bank managers to minimize the size of non-performing loans. After examining 82 banks from US, Europe, Asia and Africa, the result indicate that banks adjust the level of loan loss reserves and loan growth to minimize the size of NPLs. Our results do not show evidence that loan diversification minimizes NPLs. Further, I find that banks in developing countries reduce loan growth when they expect high NPL while banks in developed countries do not anticipate the level of NPL by adjusting loan growth. Further, I find that post-crisis Basel regulation did not lead to a decrease in the size of NPLs among banks in developed countries but appear to minimize NPLs in some developing countries. Overall, the significance and predictive power of each bank-specific factor (excluding loan diversification), regulatory variable and macroeconomic indicator in explaining NPLs depends on regional factors (less significantly) and country-specific factors (more significantly).
 
Publisher Redfame publishing
 
Contributor —
 
Date 2015-06-12
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://redfame.com/journal/index.php/afa/article/view/880
10.11114/afa.v1i2.880
 
Source Applied Finance and Accounting; Vol 1, No 2 (2015); 73-80
2374-2429
2374-2410
 
Language eng
 
Relation http://redfame.com/journal/index.php/afa/article/view/880/826