Bank Specific, Business and Institutional Environment Determinants of Banks Nonperforming Loans: Evidence from MENA Countries
AbstractThe paper empirically analyzes the determinants of nonperforming loans (NPL) and the potential impact of both business and institutional environment on credit risk exposure of banks in the MENA region. Looking at a sample of 46 banks in 12 countries over the period 2002–2006, we find that, among bank specific factors, foreign participation coming from developed countries, high credit growth and loan loss provisions reduce the NPL level. However, highly capitalized banks experience high level of credit exposure. Credit quality of banks is also positively affected by the relevance of the information published by public and private bureaus. Finally, our findings highlight the importance of institutional environment in enhancing banks credit quality. Specifically, a better control of corruption, a sound regulatory quality, a better enforcement of rule of law, and a free voice and accountability play an important role in reducing NPL in the MENA countries.
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Bibliographic InfoPaper provided by Economic Research Forum in its series Working Papers with number 547.
Length: 28 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
Publication status: Published by The Economic Research Forum (ERF)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-ARA-2010-10-09 (MENA - Middle East & North Africa)
- NEP-BAN-2010-10-09 (Banking)
- NEP-CWA-2010-10-09 (Central & Western Asia)
- NEP-EFF-2010-10-09 (Efficiency & Productivity)
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- Sabbah Gueddoudj, 2013. "Fluctuations Economiques et Dynamiques de la Constitution de Provisions Pour Créances Douteuses des Banques Luxembourgeoises," BCL working papers 81, Central Bank of Luxembourg.
- Vasiliki Makri & Athanasios Tsagkanos & Athanasios Bellas, 2014. "Determinants of Non-Performing Loans: The Case of Eurozone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(2), pages 193-206, March.
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