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Determining Impacts on Non-Performing Loan Ratio in Turkey

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  • Metin Vatansever
  • Ali HepÅŸen

Abstract

Banking sector is an essential part of a nation's economy and represents one of the most important components of a nation's capital. Similarly, the loan portfolio represents an important component of a bank’s total assets. These assets generate huge interest income which is a critical measure of the bank’s financial performance and stability. Therefore, the non-performing loan ratio is a critical tool to measure a bank’s performance. There is recently a growing recognition between macroeconomic indicators, bank-level factors and the non-performing loans (NPLs) ratio. The purpose of this study is to investigate whether there is a significant relationship between macroeconomic indicators, bank-level factors and non-performing loan ratio in Turkey. In this study linear regression models and cointegration analysis are utilized to determine the significant relations between the periods from January 2007 to March 2013. Our empirical results show that debt ratio, loan to asset ratio, real sector confidence index, consumer price index, EURO/ Turkish lira rate, USD/ Turkish lira rate, money supply change, interest rate, Turkey’s GDP growth, the Euro Zone’s GDP growth and volatility of the Standard & Poor’s 500 stock market index does not have significant effect to explain NPL ratio on multivariate perspective. On the other hand, industrial production index, Istanbul Stock Exchange 100 Index, inefficiency ratio of all banks negatively affect NPL ratio; unemployment rate, return on equity and capital adequacy ratio positively affect NPL ratio.

Suggested Citation

  • Metin Vatansever & Ali HepÅŸen, 2013. "Determining Impacts on Non-Performing Loan Ratio in Turkey," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 2(4), pages 1-7.
    • Handle: RePEc:spt:fininv:v:2:y:2013:i:4:f:2_4_7
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    Cited by:

    1. Liu, Suyi & Jin, Justin & Nainar, Khalid, 2023. "Does ESG performance reduce banks’ nonperforming loans?," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Waelchli Boris, 2016. "A proximity based macro stress testing framework," Dependence Modeling, De Gruyter, vol. 4(1), pages 1-26, November.
    3. Keshtgar, Nafiseh & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2020. "The Impact of Macroprudential Policies on the Vulnerability of the Banking System: Dynamic Panel Model," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 15(4), pages 357-379.
    4. Keshtgar, Nafiseh & Pahlavani, Mosayeb & Mirjalili, Seyed Hossein, 2020. "The Impact of Macroprudential Policies on the Vulnerability of the Banking System: Dynamic Panel Model," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 15(4), pages 357-379, October.
    5. Adriana Daniela CIUREL & Tiberiu STOICA, 2019. "Determining Impacts on Non-Performing Loan Ratio in Romania," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 20(2), pages 155-170, March.
    6. Laxmi Koju & Ram Koju & Shouyang Wang, 2018. "Does Banking Management Affect Credit Risk? Evidence from the Indian Banking System," IJFS, MDPI, vol. 6(3), pages 1-11, July.
    7. Mehmet Levent Erdas & Zeynep Ezanoglu, 2022. "How Do Bank-Specific Factors Impact Non-Performing Loans: Evidence from G20 Countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(2), pages 97-122.
    8. Asmaul Husna & Ibnu Satria, 2019. "Effects of Return on Asset, Debt to Asset Ratio, Current Ratio, Firm Size, and Dividend Payout Ratio on Firm Value," International Journal of Economics and Financial Issues, Econjournals, vol. 9(5), pages 50-54.
    9. Samar Issa & Gulhan Bizel & Sharath Kumar Jagannathan & Sri Sarat Chaitanya Gollapalli, 2024. "A Comprehensive Approach to Bankruptcy Risk Evaluation in the Financial Industry," JRFM, MDPI, vol. 17(1), pages 1-21, January.
    10. Ayrton Psaila & Jonathan Spiteri & Simon Grima, 2019. "The Impact of Non-Performing Loans on the Profitability of Listed Euro-Mediterranean Commercial Banks," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 166-196.

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