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How accounting information and macroeconomic environment determine credit risk? Evidence from Greece

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  • Vasiliki Makri

    (Department of Business Administration, University of Patras, Greece)

  • Konstantinos Papadatos

    (Department of Business Administration, University of Patras, Greece)

Abstract

In this paper, we study the determinants of credit risk in the Greek banking sector. Credit risk is related to bank asset quality and considered responsible for bank failures. In this context, we investigate how loan quality can be explained by accounting and macroeconomic factors. Aggregate loans loss provisions (LLP) are used as a proxy for measuring credit risk. Using quarterly aggregate data that span from 2001Q1 to 2012Q4, we examine a period that covers the recent financial crisis in Greece. The results of Generalized Method of Moments (GMM) estimations indicate that LLP is positively affected by unemployment, public debt, loans loss provisions of previous quarter and negatively by capital adequacy ratio. Therefore, our findings support the hypotheses that both macroeconomic environment and accounting information exert significant influence on the credit risk of Greek banking system.

Suggested Citation

  • Vasiliki Makri & Konstantinos Papadatos, 2014. "How accounting information and macroeconomic environment determine credit risk? Evidence from Greece," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 7(1), pages 129-143, April.
    • Handle: RePEc:tei:journl:v:7:y:2014:i:1:p:129-143
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    Cited by:

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    2. Albulena Shala & Hysen Ismajli & Rezearta Perri, 2018. "A Comparative Study of Prudential Regulation on Loan Classification and Provisioning of the South East European Countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(5), pages 1337-1346.
    3. Vasiliki Makri, 2016. "Towards an Investigation of Credit Risk Determinants in Eurozone Countries," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 15(1), pages 27-57, March.
    4. Mourouzidou-Damtsa, Stella & Milidonis, Andreas & Stathopoulos, Konstantinos, 2019. "National culture and bank risk-taking," Journal of Financial Stability, Elsevier, vol. 40(C), pages 132-143.
    5. Vasiliki MAKRI & Konstantinos PAPADATOS, 2016. "Determinants Of Loan Quality: Lessons From Greek Cooperative Banks," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 17, pages 115-140, June.
    6. Ruba Bsoul & Maysa’a Milhem & Mahmoud Odat, 2022. "Determinants of Banks’ Credit Risk: Evidence from Jordanian Banks Listed on Amman Stock Exchange," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, September.
    7. Mwinlaaru, Peter Yeltulme & Ofori, Isaac Kwesi & Adiyiah, Kwadwo Agyeman & Idun, Anthony Adu-Asare, 2016. "Non-Performing Loans and Universal Bank’s Profitability," MPRA Paper 82902, University Library of Munich, Germany.

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    More about this item

    Keywords

    Credit risk; loan loss provisions; Greek banking system; accounting information and macroeconomic environment; GMM;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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