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Incapability or Bad Luck? Testing the “Bad Management” Hypothesis in the Italian Banking System

In: The Business of Banking

Author

Listed:
  • Fabrizio Crespi

    (University of Cagliari)

  • Mauro Aliano

    (University of Cagliari)

Abstract

Using specific evidences from the Italian banking sector and following a microeconomic approach, in this chapter we test the “bad management” hypothesis first introduced by Berger and Deyoung (1997), which suggest that poor managerial practice causes an increase in problem loans after a lag. The chapter gives a contribution to the existing literature in this field, in that it investigates nonperforming loans (NPLs) and other soured loans jointly. Our results confirm the “bad management” hypothesis, in that we discover a positive (lagged) relation between the value of past due/overdrawn loans and NPLs which, in a management perspective, indicates the incapability of the credit manager to anticipate or to recover (at least partially) problematic credits.

Suggested Citation

  • Fabrizio Crespi & Mauro Aliano, 2017. "Incapability or Bad Luck? Testing the “Bad Management” Hypothesis in the Italian Banking System," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Giusy Chesini & Elisa Giaretta & Andrea Paltrinieri (ed.), The Business of Banking, chapter 0, pages 55-78, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-54894-4_4
    DOI: 10.1007/978-3-319-54894-4_4
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