Bad Loans and Resource Allocation in Crisis Years: Evidence from European Banks

29 Pages Posted: 18 Apr 2017

See all articles by Brunella Bruno

Brunella Bruno

Bocconi University - Department of Finance

Immacolata Marino

University of Naples Federico II - CSEF - Center for Studies in Economics and Finance; University of Naples Federico II

Date Written: February 6, 2017

Abstract

The aim of this study is to explore the relation between loan portfolio quality and lending in European banks over 2005-2014. We focus on lending behavior of banks from distressed countries since the Euro sovereign debt crisis. Our results confirm the existence of a negative nexus between poor loan quality and lending, since a higher NPL ratio explains a reduced loan growth and a lower allocation to loans at the advantage of government debt (as a percentage of total assets). Such an impact on lending and reallocation effect are strong and consistent across specifications and over and above other factors that may affect credit supply.

Keywords: bad loans, NPLs, non-performing loans, bank lending, crisis

JEL Classification: G20, G21, G01

Suggested Citation

Bruno, Brunella and Marino, Immacolata, Bad Loans and Resource Allocation in Crisis Years: Evidence from European Banks (February 6, 2017). BAFFI CAREFIN Centre Research Paper No. 2017-52. Available at SSRN: https://ssrn.com/abstract=2954515 or http://dx.doi.org/10.2139/ssrn.2954515

Brunella Bruno (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

Immacolata Marino

University of Naples Federico II - CSEF - Center for Studies in Economics and Finance

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

University of Naples Federico II ( email )

via Cinthia, 4
Naples, Caserta 80126
Italy

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