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Article

Yok Yong Lee, Mohd Hisham Dato Haji Yahya, Muzafar Shah Habibullah and Zariyawati Mohd Ashhari

This paper aims to provide new empirical evidence on the non-performing loan (NPL) determinants of the EU conventional banks, in the context of macroeconomic factors…

Abstract

Purpose

This paper aims to provide new empirical evidence on the non-performing loan (NPL) determinants of the EU conventional banks, in the context of macroeconomic factors, dimensions of country governance and bank-specific characteristics.

Design/methodology/approach

The panel data sets of 1,053 conventional banks were obtained over the period of 2007-2016. The Hodrick–Prescott filter was adopted to extract business cycle and credit cycle from real gross domestic product and credit to the private non-financial sector, correspondingly. System-generalised methods of moment was then used to identify the significant determinants of NPL.

Findings

The empirical results reveal that NPL is primarily driven positively by lagged-one NPL and risk profile. In consonance with the skimping hypothesis, NPL has a significant positive relationship with the cost efficiency. The empirical finding of the business cycle coincides with the Austrian business cycle theory. Particularly, NPL is relatively low during rapid economic growth of credit-sourced business boom. Whereas, business bust happens when credit creation runs its course and is associated with high NPL. This paper encapsulates that NPL is driven by not only macroeconomic factors and bank-specific characteristics but also the dimensions of country governance.

Practical implications

Policymakers should introduce policies that are geared towards proper dimensions of country governance.

Originality/value

The novelty of this research does not rely on the multidimensions of NPL determinants but on the disentanglement of the conventional banks with dual identity (i.e. Islamic banks, cooperative banks and ethical banks). It considers business cycle, credit cycle and previous NPL as the potential determinants.

Details

Journal of Financial Economic Policy, vol. 12 no. 2
Type: Research Article
ISSN: 1757-6385

Keywords

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Article

Ronald Ravinesh Kumar, Peter Josef Stauvermann, Arvind Patel and Selvin Sanil Prasad

The banking sector stability depends in large part on the size of non-performing loans (NPLs). Hence, the factors which explain the problem loans are very useful…

Abstract

Purpose

The banking sector stability depends in large part on the size of non-performing loans (NPLs). Hence, the factors which explain the problem loans are very useful information for banks. Notably, studies in this regard with respect to the small developing countries’ banking sector have received less attention. Therefore, this study aims to examine the determinants of NPLs with a case of Fiji’s banking sector, over the period 2000-2013.

Design/methodology/approach

The balanced sample consists of the entire banking sector (five commercial banks and two non-bank financial institutions). First, the authors estimate a base model which comprise bank-specific indicators that are related to bank management and then they extend the estimations to include macroeconomic/structural factors such as economic growth, inflation, changes of the real effective exchange rate, unemployment, remittances, political instability and external events like the global financial crisis. The estimations are done using pooled OLS, the random effects and the fixed effects regression methods.

Findings

The results show that the following indicators have negative association with NPL and are statistically significant with the conventional levels: return on equity, capital adequacy requirement, market share based on assets, unemployment and time. On the other hand, the net interest margin has a positive and statistically significant association with NPL.

Research limitations/implications

Subsequently, the stability of the banking sector in small developing countries such as Fiji is largely dependent on banks’ profitability, solvency, size in terms of market share and the presence of a learning curve and keeping a close tab on the interest rate spread between loans and deposits.

Practical implications

The paper highlights the specific factors determining NPL in small developing economy of Fiji.

Originality/value

This study is the first to examine specific factors determining NPLs with respect to small developing economies in the Oceania region.

Details

Accounting Research Journal, vol. 31 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

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Article

Deborah Lynn Roberts, Marina Candi and Mathew Hughes

The ability to make use of social network sites (SNSs) to promote new products and facilitate positive word of mouth around new product launch (NPL) presents an important…

Abstract

Purpose

The ability to make use of social network sites (SNSs) to promote new products and facilitate positive word of mouth around new product launch (NPL) presents an important opportunity. However, the mechanisms and motivations of SNS users are not well understood and businesses frequently fail to realise these opportunities. The purpose of this paper is to examine some of the forces that motivate people to spend time on SNS sites and how these motivations are related with people’s propensity to engage in behaviours that can be beneficial for NPL.

Design/methodology/approach

Hypotheses are tested using data collected using an online survey from a broad sample of SNS users worldwide.

Findings

People who spend time on SNSs to be challenged, to escape, or to connect with others are more likely than other users to pay attention to advertisements on SNS. Users that spend time on SNSs in the pursuit of information, to be challenged, or to connect with others are more likely than other users to provide word of mouth reviews and recommendations about products.

Research limitations/implications

The authors make an empirical contribution to knowledge by providing evidence about the categories of user motivations for engagement with SNSs that might be related with their contributions to NPL activities, namely, paying attention to advertisements and providing WOM recommendations.

Practical implications

By understanding what motivates SNS users, firms can identify potentially valuable users and develop a more strategic and targeted approach to NPL. This can help firms turn disappointing social media campaigns into more successful ones.

Social implications

Whilst the growth in usage of SNS has important implications for business and NPL there are also wider societal implications. Arguably, even before the widespread adoption of SNSs, society has been in a state of flux and transition as people sought to liberate themselves from the norms and social codes of previous generations. We have witnessed a rise of individualism, associated with values such as personal freedom and where people actively construct their own identities. Somewhat ironically, individualism has motivated people to seek alternative social activities and form communities, such as those on SNSs where they can fulfil their need for connection and belonging. SNSs appear to have accelerated this trend.

Originality/value

This study provides new insights about the use of SNSs for NPL and what motivates users to engage in behaviours that are beneficial to NPL.

Details

Industrial Management & Data Systems, vol. 117 no. 10
Type: Research Article
ISSN: 0263-5577

Keywords

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Book part

Junkyu Lee and Peter Rosenkranz

The recent rise of nonperforming loans (NPLs) in some Asian economies calls for close analysis of the determinants, the potential macrofinancial feedback effects, and the…

Abstract

The recent rise of nonperforming loans (NPLs) in some Asian economies calls for close analysis of the determinants, the potential macrofinancial feedback effects, and the implications for financial stability in the region. Using a dynamic panel model, we assess the determinants of the evolution of bank-specific NPLs in Asia and find that macroeconomic conditions and bank-specific factors – such as rapid credit growth and excessive bank lending – contribute to the buildup of NPLs. Further, a panel vector autoregression (VAR) analysis of macrofinancial implications of NPLs in emerging Asia offers significant evidence for feedback effects of NPLs on the real economy and financial variables. Impulse response functions demonstrate that a rising NPL ratio decreases the GDP growth, credit supply and increases the unemployment rate. Our findings underline the importance of considering policy options to swiftly and effectively manage and respond to a buildup of NPLs. The national and regional mechanisms underlying NPL resolution are important for safeguarding financial stability in an increasingly interconnected global financial system.

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Article

Peterson K. Ozili

This paper aims to investigate the influence of financial development on non-performing loans (NPL).

Abstract

Purpose

This paper aims to investigate the influence of financial development on non-performing loans (NPL).

Design/methodology/approach

The model used in this study follows the NPL model of Louzis et al. (2012), Ozili (2015) and Beck et al. (2015).

Findings

The findings indicate that financial development, measured as foreign bank presence and financial intermediation, are positively associated with NPLs. Also, bank efficiency, loan loss coverage ratio, competition and banking system stability are inversely associated with NPLs, while NPLs are positively associated with banking crises and bank concentration. In the regional analysis, NPLs are negatively associated with regulatory capital and bank liquidity, implying that banking sectors with greater regulatory capital and liquidity experience fewer NPLs.

Practical implications

National bank regulators/supervisor should not only consider the role that financial development structures play in influencing aggregate NPLs but also ensure that thorough supervision of the lending practices of banks is in place as well as the active monitoring of the financial intermediation process in the country.

Originality/value

The study is the first to use a global sample to examine the direct relationship between NPL and financial development.

Details

The Journal of Risk Finance, vol. 20 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

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Article

Minna Matikainen, Harri Terho, Petri Parvinen and Anne Juppo

This study examines the role and relative impact of market orientation, product orientation and relationship orientation on new product launch performance, investigating…

Abstract

Purpose

This study examines the role and relative impact of market orientation, product orientation and relationship orientation on new product launch performance, investigating product advantage and market-based assets as alternative mediating mechanisms, which link these strategic orientations to launch performance.

Design/methodology/approach

Survey data from the pharmaceutical industry are used to test hypotheses in the research model using partial least squares modeling.

Findings

Findings show that while each examined strategic orientation relates positively to launch performance, their performance effects and related mechanisms vary significantly. Results demonstrate a firm’s relationship orientation is the strongest predictor of launch performance, and accumulated market-based assets represent an alternative relational mediator besides product advantage linking firms’ orientations and launch performance.

Research limitations/implications

The empirical study is based on cross-sectional data collected in one specific industry sector. The authors encourage researchers to confirm the key findings in different industry and other contextual settings.

Practical implications

New product launch can be effectively managed as a relational activity. Firms benefit from paying explicit attention to strategic orientations and relationships. Especially, top management should foster a relationship-oriented organizational culture, develop relational competences and fully use the firm’s accumulated market-based assets for increased launch performance.

Originality/value

The study extends knowledge on the role of strategic orientations in launch performance by highlighting the significance of relationship orientations and providing novel knowledge on the key mediating mechanisms between strategic orientations and launch performance.

Details

Journal of Business & Industrial Marketing, vol. 31 no. 5
Type: Research Article
ISSN: 0885-8624

Keywords

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Book part

Amy Yueh-Fang Ho, Hsin-Yu Liang and Tumenjargal Tumurbaatar

This is the first study to investigate the impact of corporate social responsibility (CSR) on corporate financial performance (CFP) in Mongolian banks. We hand-collect…

Abstract

This is the first study to investigate the impact of corporate social responsibility (CSR) on corporate financial performance (CFP) in Mongolian banks. We hand-collect data to construct CSR disclosure index from 65 annual reports of 12 banks in Mongolia from 2003 to 2012. The results indicate that banks with larger size or Chief Executive Officer duality exhibit higher CSR performance. Moreover, banks with higher CSR performance tend to have higher net interest margin and lower non-performing loan. Furthermore, the CSR–CFP relationship varies before and after the financial crisis. The findings provide meaningful insight to the foreign investors regarding the effect of CSR on the profitability and credit risk in Mongolian banking sector.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-78973-285-6

Keywords

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Book part

Tria Ratnasari, Arni Surwanti and Firman Pribadi

There is a global concern over climate change issues. The banking sector is expected to join the initiatives in solving environmental issues, even though banking sectors…

Abstract

There is a global concern over climate change issues. The banking sector is expected to join the initiatives in solving environmental issues, even though banking sectors have no direct contribution to environmental damage. Banking commitment to environmental issues is required. The banking sector should have a responsibility for monitoring and managing the impacts of the ecological effects as the result of their business activities. The advantages of green banking implementation are that bank can avoid the use of paper by utilizing online transaction for their daily operation such as internet banking, SMS banking, and ATM. This will bring in the paperless operation into the banks, which in turn will reduce the logging of the forest. Banks also can develop an environmentally friendly lending policy for their business activities. This research aims to determine the impact of green banking daily operation, green banking policy (GBP), capital adequacy, non-performing loan (NPL), bank efficiency, and bank liquidity on bank profitability. The sample of this research is the Indonesian banking sector during the period 2012–2016. The results showed that green banking daily operation, capital adequacy, and bank liquidity have a positive effect on bank profitability. GBP and bank efficiency negatively affect bank profitability, while the NPL did not have a significant impact on banks’ profitability.

Details

Recent Developments in Asian Economics International Symposia in Economic Theory and Econometrics
Type: Book
ISBN: 978-1-83867-359-8

Keywords

Abstract

Details

Soldering & Surface Mount Technology, vol. 12 no. 1
Type: Research Article
ISSN: 0954-0911

Keywords

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Article

Claudio Oliveira De Moraes, José Americo Pereira Antunes and Adriano Rodrigues

The purpose of this paper is to analyze the financial friction effect of non-performing loans (NPLs) on financial intermediation (FI) through empirical evidence from the…

Abstract

Purpose

The purpose of this paper is to analyze the financial friction effect of non-performing loans (NPLs) on financial intermediation (FI) through empirical evidence from the Brazilian experience.

Design/methodology/approach

The authors develop a new variable, financial intermediation flow and a new indicator, FI, both measures of FI. To empirically test FI, the authors use a dynamic panel data framework that draws on 101 banks (December 2000 to December 2015).

Findings

An increase in NPL reduces FI. Thus, NPL amplifies financial friction in FI. This result holds in different time frames, such as the pre-crisis period, the crisis period and the post-crisis period.

Practical implications

The FI measure developed in this study offers the policymakers a possibility to monitor financial stability.

Originality/value

This study adds to this debate by proposing a measure of FI derived from financial flows. This measure allows one to estimate the role of NPL as a financial friction that can pose a threat to financial stability.

Details

Journal of Economic Studies, vol. 46 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

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