The Effect of Macroeconomic Variables on Non-performing Loans in Turkish Banking Sector

İLHAMİ KARAHANOĞLU
2015 Journal of International Social Research  
Using a panel data approach in the Pakistan banking sector over the period 2010 to 2016, this study examines the bank-specific and macroeconomic determinants of non-performing loans. We use quantitative research design with OLS random effect model. Regression and correlation analyses are used in this study. This study finds a rise in capital adequacy ratio, bank size, GDP growth rate, and inflation; reduce the non-performing loans (NPL) ratio. Our results also show that a rise in loan loss
more » ... e in loan loss provisions enhances the NPL ratio. Our results suggest that banks with poor asset-quality can sabotage the growth of fiscal and the economic sector. Outcomes of the study emphasize the need to clear out the NPLs to keep the financial sector sound. NPLs can cause high loan loss provisions that affect the capitalization of banks that ultimately impact fiscal and economic growth. Bank supervisory agencies should, therefore, pay attention to the monitory and macroeconomic policies of the banks. This study examines the impact of idiosyncratic and macroeconomic determinants of non-performing loans on banks' asset quality using recent data from 2010 to 2016, when various banking sector reforms were implemented.
doi:10.17719/jisr.20153913804 fatcat:rl5hph3ohfbynga57zoxp2cdjy