Assessing the Factors that Impact Non-Performing Loan Ratio: An Application On Deposit Banks By Using Dynamic Panel Data

Abstract

This study aims to determine the factors that are effective on non-performingloans ratio after the 2001 local financial crisis. State-owned banks, privately-ownedbanks and foreign banks that operate in Turkey between the years 2002 and 2014 areexamined. According to System-GMM and Difference GMM results, lagged value ofnon-performing loans, net interest margin, capital adequacy and solvency ratio havenegative effects on non-performing loans ratio. On the other hand, interest applied toloans, loans/ deposits ratio, inefficiency and operating efficiency have positive effectson non performing loans. Although the results are consistent with moral hazard and badmanagemet hypothesis, they are inconsistent with diversification hypothesis.