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Liquidity-threshold effect in non-performing loans

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  • Pop, Ionuț Daniel
  • Cepoi, Cosmin Octavian
  • Anghel, Dan Gabriel

Abstract

Using a Panel Smooth Transition Regression (PSTR) model, we find that the non-performing loans of banks with loans-to-deposit ratios surpassing the threshold value of 95% are significantly more sensitive to management performance and ownership concentration. Also, the impact of macroeconomic factors like unemployment or budget deficit is more pronounced, while the sensitivity to inflation decreases. This means that such low-liquid (risk-seeking) banks are a greater threat to banking system's stability and should be more closely monitored by regulators.

Suggested Citation

  • Pop, Ionuț Daniel & Cepoi, Cosmin Octavian & Anghel, Dan Gabriel, 2018. "Liquidity-threshold effect in non-performing loans," Finance Research Letters, Elsevier, vol. 27(C), pages 124-128.
    • Handle: RePEc:eee:finlet:v:27:y:2018:i:c:p:124-128
    DOI: 10.1016/j.frl.2018.02.012
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    More about this item

    Keywords

    Non-performing loans; Panel smooth transition regression; Emerging markets;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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