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Alternative financing and the non-performing loans of the corporate sector in Estonia

Author

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  • Merike Kukk
  • Natalia Levenko

Abstract

The paper investigates how much alternative options for corporate financing have affected the quality of domestic corporate bank loans in Estonia. We use quarterly data from 2004Q1�2019Q3 and three different methods to detect the relationship between the non-performing corporate loans of domestic banks and alternative sources of financing for firms. We find that a rise in intra-group borrowing from parent companies is associated with an increase in overdue corporate loans. There is also some evidence that foreign bank loans and trade credit might be positively related to non-performing corporate loans. The results suggest that a broader set of sources of corporate financing beyond domestic bank loans should be considered when assessing the dynamics of the overdue corporate loans of the domestic banking sector.

Suggested Citation

  • Merike Kukk & Natalia Levenko, 2021. "Alternative financing and the non-performing loans of the corporate sector in Estonia," Bank of Estonia Working Papers wp2020-6, Bank of Estonia, revised 08 Apr 2021.
    • Handle: RePEc:eea:boewps:wp2020-6
    DOI: 10.23656/25045520/062020/0180
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    More about this item

    Keywords

    corporate debt; non-performing loans; alternative financing; Bayesian model averaging; local projection method;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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