Benchmarking Non-Performing Loans

37 Pages Posted: 24 Jan 2017 Last revised: 1 Aug 2019

See all articles by Giovanni Cerulli

Giovanni Cerulli

Italian National Research Council (CNR)

Vincenzo D'Apice

Center for Relationship Banking and Economics

Franco Fiordelisi

University of Rome III - Department of Business Studies; Middlesex University - Business School

Francesco Masala

Independent

Date Written: January 23, 2017

Abstract

This paper provides a new perspective to evaluate the economic role played by banks in non-performing loans (NPLs) accumulation. We estimate a benchmark NPL levels on the judicial inefficiency dimension, controlling for country- and bank-specific factors. To this end, first, we empirically establish whether judicial inefficiency is a key determinant of NPLs in the European banking system for the period 2006–2017. Using dynamic-Generalized Method of Moments estimations, we show that higher contract enforcement inefficiency increases NPLs. Then, we estimate NPLs benchmark levels using a dose response function based on the judicial inefficiency. Our results show that Norway, Sweden, and Italy performed better than the European mean while Austria, Germany, Spain, Ireland, Cyprus, and Greece performed worse than the European mean. Our results have several policy implications.

Keywords: Non-performing loans, European banking Financial stability, Benchmarking

JEL Classification: E32, G21, G28, C23

Suggested Citation

Cerulli, Giovanni and D'Apice, Vincenzo and Fiordelisi, Franco and Masala, Francesco, Benchmarking Non-Performing Loans (January 23, 2017). Available at SSRN: https://ssrn.com/abstract=2903851 or http://dx.doi.org/10.2139/ssrn.2903851

Giovanni Cerulli

Italian National Research Council (CNR)

Bologna
Italy

Vincenzo D'Apice (Contact Author)

Center for Relationship Banking and Economics ( email )

Franco Fiordelisi

University of Rome III - Department of Business Studies ( email )

Via Silvio D'Amico 77
Via Silvio D'Amico 77
Rome, RM 00145
Italy

HOME PAGE: http://host.uniroma3.it/docenti/fiordelisi/?home

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

Francesco Masala

Independent ( email )

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