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Nonperforming loans and related lending: Evidence from Ukraine

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  • Vyshnevskyi, Iegor
  • Sohn, Wook

Abstract

This study examines bank-specific factors that determine nonperforming loans (NPLs) in Ukraine. Analysis of an unbalanced sample of 207 banks from 2008 to 2020 reveals that the NPLs of banks increase with related lending, suggesting that related lending is detrimental to the soundness of bank loans owing to the standard information advantage that can be offset by the bank's conflict of interest in banking relationships. Moreover, a positive shock to NPLs causes a substantial increase in related lending. These results highlight the importance of close monitoring of banks' lending practices to related parties for suppressing excessive risk-taking behavior of banks.

Suggested Citation

  • Vyshnevskyi, Iegor & Sohn, Wook, 2023. "Nonperforming loans and related lending: Evidence from Ukraine," Emerging Markets Review, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:ememar:v:57:y:2023:i:c:s1566014123000742
    DOI: 10.1016/j.ememar.2023.101069
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    Keywords

    Nonperforming loans; Related party lending; Bank capitalization; Loan concentration; Lending behavior; Emerging market economy; Ukraine;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises

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