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DETERMINING IMPACTS ON NON-PERFORMING LOAN RATIO IN TURKEY

Paylamak Gzeldir :)

Journal of Finance and Investment Analysis, Vol !, "o#, !$%&

'((*+I"I"G I+PA- ." "."/P(*F.*+I"G 0.A" *AI. I" 1*2(3

Metin Vatansever1and Ai !e"#en$

A%stra&t

4ankin5 sector is an essential 6art of a nation7s economy and re6resents

one of t8e most im6ortant com6onents of a nation7s ca6ital -imilarly, t8e

loan 6ortfolio re6resents an im6ortant com6onent of a 9ank7s total assets

8ese assets 5enerate 8u5e interest income 8ic8 is a critical measure of

t8e 9ank7s ;nancial 6erformance and sta9ility 8erefore' t8e non/

6erformin5 loan ratio is a critical tool to measure a 9ank7s 6erformance

8ere is recently a 5roin5 reco5nition 9eteen macroeconomic

indicators, 9ank/level factors and t8e non/6erformin5 loans ,

Istan9ul -tock (>c8an5e %$$ Inde>, ineDciency ratio of all 9anks

ne5atively aCect "P0 ratioE unem6loyment rate, return on euity and

ca6ital adeuacy ratio 6ositively aCect "P0 ratio

(EL &assi)&ati*n n+,%ersB&, ($$, (!=, (!
https://simplesharebuttons.com/http://gencfinans.com/2014/03/17/determining-impacts-on-non-performing-loan-ratio-in-turkey/#_ftn1http://gencfinans.com/2014/03/17/determining-impacts-on-non-performing-loan-ratio-in-turkey/#_ftn2http://gencfinans.com/2014/03/17/determining-impacts-on-non-performing-loan-ratio-in-turkey/#_ftn1http://gencfinans.com/2014/03/17/determining-impacts-on-non-performing-loan-ratio-in-turkey/#_ftn2https://simplesharebuttons.com/


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Ke./*rdsurkey, "on/6erformin5 loans, +acroeconomic indicators,

4ank s6eci;c indicators, ointe5ration

1 Intr*d+&ti*n

8ere is a 5roin5 reco5nition t8at t8e uantity or 6ercenta5e of non/

6erformin5 loans t

section 6rovides a literature revie t8at attem6ts to delineate t8e

determinants of loan 6ortfolio uality and "P0 ratio -ection t8ree

6rovides overvie t8e data set and t8eoretical frameork ado6ted in t8is6a6er and section four 5ives t8e em6irical results Finally, section ;ve

oCers concludin5 comments

$ Literat+re Revie/

8is section revies t8e 6revious em6irical studies on determinin5 factors

of t8e "P0s +any studies investi5ate t8e factors t8at induce "P0s 9y

e>aminin5 6otential links 9eteen 9ank/s6eci;c varia9les and

macroeconomic factors


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H% study ;ndin5 a re5ression euation to e>6lain t8e trends of "P0 ratio in

an5 2on5 9y usin5 nominal interest rates, t8e PI, 6ro6erty 6rices, euity

6rices, num9er of 9ankru6tcies, t8e unem6loyment rate, and real G'P as

e>6lanatory varia9les 8ey ;nd t8at t8e "P0 ratio rises it8 increasin5

nominal interest rates and an increasin5 num9er of 9ankru6tcies, 9ut

decreases it8 8i58er PI inKation, economic 5rot8, and 6ro6erty 6rice

inKation Additionally, H! s8os t8at zec8 "P0 of t8e cor6orate sector

rate can 9e 6ositively aCected 9y increasin5 real eCective e>c8an5e rate,

t8e loan to G'P ratio, unem6loyment and interest/rate increases

4eside on classic linear re5ression model, H& and H# use VA*

met8odolo5y to investi5ate 8ic8 factors is most eCect on "P0s HB

indicates yields can 9e used to make accurate 6redictions of t8e future

eCects of t8e 9usiness cycle on asset uality HL s8o t8e im6act of G'P

5rot8 and t8e 9usiness cycle on credit risk and also on t8e uality of

9ank loans

.n t8e ot8er 8and, H= and HM study 6anel date set to understand of "P0s7

9e8aviors on t8eir on researc8es 8ey use 9ot8 macroeconomic and

9ank/s6eci;c factors Accordin5 to t8eir studies, t8e uality of loans can

9e e>6lained mainly 9y macroeconomic varia9les

0 Data and te Te*reti&a Fra,e/*r2

031 Overvie/ *4 Data

8ere is a 5roin5 literature 8ic8 su55ests t8at "P0 ratio may9e 9e

e>6lained 9y 9ot8 macroeconomic and 9ank s6eci;c factors In t8is study,

e take into consideration, L 9ank s6eci;c factors, %$ macroeconomic

factors and ! 5lo9al factors a9le %, ta9le ! and ta9le & 5ives t8ose

varia9les

a9le %: 4ank -6eci;c Factors

4ank 0evel Factors 'e;nitions

I"(F

'e6t

*.(


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0.A-

A*

a9le !: +acroeconomic Factors

+acroeconomic Factors 'e;nitions

*-I on;dence Inde>/*eal -ector

PI onsumer Price Inde>

(1* (uro? urkis8 0ira *ate

1-' 1-'? urkis8 0ira *ate

IPI Industrial Production Inde>

I-( Istan9ul -tock (>c8an5e%$$ Inde>

+&3 +oney -u66ly 8an5e

1* 1nem6loyment *ate

I* Interest *ate

G"P Gross "ational Product Grot8

a9le &: Glo9al FactorsGlo9al Factors 'e;nitions

(G"P 8e (uro @one7s G'P Grot8

VINVolatility of t8e -tandard Poor7s B$$ -tock +arket

Inde>

4ased on countries7 ;nancial condition and le5islation, non/6erformin5

loans7 term


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-am6le !$$=:$% !$%&:$&

.9servations: =B

+ean $$B=L

+edian $$&&!!B

+a>imum $$B$=#=

+inimum $$!B%B=

-td 'ev $$$=L==

-keness $L&%!L

2urtosis !!=#%$

Jarue/4era =L!=#

Pro9a9ility $$!!$L$

a9le # summaries some descri6tive statistics of "P0 ratio and 6resents

t8at t8e avera5e ratio, minimum and ma>imum value is rou58ly L,

!!B and B$= res6ectively, durin5 t8e 6eriod of January !$$= to +arc8

!$%& Fi5ure % indicates 8o t8e "P0 ratio is distri9uted across t8e time

6eriod

Fi5ure %: otal "P0 *atio in urkey, January !$$=/+arc8 !$%&

As seen from t8e ;5ure %, t8ere is one si5ni;cant Qum6 in t8e "P0 ratio in

urkey, 8ic8 occurs in t8e startin5 6eriod of t8e Glo9al Financial risis

t8at ori5inated in t8e 1-A it8 t8e !$$= colla6se of t8e su9/6rimes

mort5a5e market It s8os 8o t8e 5lo9al crises eCects "P0 ratio in

urkis8 credit market oever, "P0 ratio 5oes don sli58tly after t8e

5lo9al crises 8e economy uickly recovered and continued to 5ro over

t8e ne>t folloin5 mont8s, 8ic8 is reKected in t8e im6rovement of t8e

"P0 ratio

03$ Te*reti&a Fra,e/*r2

03$31 C*inte5rati*n Ana.sis

8e conce6t of cointe5ration and t8e im6lications of cointe5ratin5

relations8i6s are very relevant in t8e real estate market *eal estate

economic and investment t8eory often su55ests t8at to or more

varia9les ould 9e e>6ected to 8old some lon5/run relations8i6 it8 one

anot8er 8erefore, cointe5ration analysis is a crucial tool for t8e e>istence

of suc8 a lon5/run relations8i6 H%% 8ere are a num9er of met8ods fortestin5 cointe5ration in t8e literature 8is article considers to most


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commonly used tests of cointe5rationE namely (n5le/Gran5er


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8e sim6lest re5ression model can 9e ritten for "P0 ratio as


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a66ly formal unit root tests in eac8 series to test t8e relia9ility of our

estimates

93$31 Unit R**t Tests

8e esta9lis8ed standard 6rocedure for cointe5ration analysis is to start

it8 unit root tests on t8e time series data 9ein5 analyzed 8e

Au5mented 'ickey/Fuller


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IPI /!!&! $$!L /%B&$& $$$$ *eQect t8e null

I-( /M$ $$$$ /=#& $$$$ *eQect t8e null

1* /BM!B $$$$ /&%=M $$$! *eQect t8e null

*.( /B=#! $$$$ /#M# $$$$ *eQect t8e null

I"(F /#L%$ $$$$ /#L%$ $$$$ *eQect t8e null

A* /L%B= $$$$ /L%MB $$$$ *eQect t8e null

8e A'F and PP test statistics for t8e ;rst diCerence varia9les are all

si5ni;cant at B level of si5ni;cance, 8ic8 leads to reQection of t8e null

8y6ot8esis t8at t8ere is a unit root 6ro9lem in t8e varia9les 4ased on A'F

and PP test, it is a66arent t8at t8e ;rst diCerence varia9les are stationary,

8ic8 im6lies t8at t8e varia9les are inte5rated of order one, Iistence of cointe5ratin5 relations8i6 9eteen t8e "P0s ratio and several

macroeconomic and 9ank s6eci;c factors 8e null 8y6ot8esis is t8at t8e

residuals 8ave a unit root 6ro9lem a5ainst t8e alternative t8at t8e

varia9les cointe5rate 8e A(G test is 6resented in t8e 9elo ta9le


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o sum u6, our conclusion is 9ased on 9ot8 t8e A(G and *'R tests

5ivin5 t8e varia9les t8at "P0, IPI, I-(, 1*, *.(, I"(F and A* are

cointe5rated 'e6endin5 on t8ese results, e may infer t8at t8e

a66ro6riate model for "P0 is t8e one re6resented in euation c8an5e%$$ Inde> /real sector, consumer 6rice inde>, (1*.? urkis8 lira rate, 1-'?

urkis8 lira rate, money su66ly c8an5e, interest rate, G'P 5rot8, t8e

(uro @one7s G'P 5rot8 and volatility of t8e -tandard Poor7s B$$ stock

market inde> does not 8ave si5ni;cant eCect to e>6lain "P0 ratio onmultivariate 6ers6ective

.n t8e ot8er 8and, industrial 6roduction inde> c8an5e %$$ Inde>


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analysts, 6olicymakers, investors and ;nancial institutions to a 9etter

understandin5 of 9ankin5 and credit market conditions as ell as t8eir

im6act on economic activity, and t8e national ;nancial sta9ility and

soundness

Re4eren&es

H% - Gerlac8, R Pen5 and -8u, +acroeconomic conditions and

9ankin5 6erformance in on5 2on5 -A*: A 6anel data study,

4I- Papers, $$, 4ank for International -ettlements, 4asel,

H! P Jaku9ik, +acroeconomic environment and credit risk, Czech Journal

of Economics and Finance,1

8ica5o,

H# R 4lasc8ke and + Jones, -tress testin5 of ;nancial systems: An

overvie of issues, met8odolo5ies and F-AP e>6eriences, I+F Working

Paper, >, Ras8in5ton,

HB + Gam9era, -im6le forecasts of 9ank loan uality in t8e 9usiness

cycle, Emerging Issue Series, 0, Federal *eserve 4ank of 8ica5o,

8ica5o,

HL R 4lasc8ke and + Jones, -tress testin5 of ;nancial systems: An

overvie of issues, met8odolo5ies and F-AP e>6eriences, I+F Working

Paper, >, Ras8in5ton,

H= 'P 0ouzis, A Vouldis and V0 +eta>as, +acroeconomic and 9ank/

s6eci;c determinants of non/6erformin5 loans in Greece: A com6arative

study of mort5a5e, 9usiness and consumer loan 6ortfolios,Journal of

Banking & Finance, 0?

HM " 2lein, "on/6erformin5 loans in (-((: 'eterminants and im6act on

macroeconomic 6erformance, I+F Working Paper, 10=@$, Ras8in5ton,

!$%&

H 4ankin5 *e5ulation and -u6ervision A5ency


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H%$ entral 4ank of t8e *e6u9lic of urkey


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!"eey and Rest 6rocedure may not a66ro6riate in small sam6les -ince

e 8ave =B o9servations, our sam6les may 9e re5arded as reasona9le

lar5e

&o la5s 8ave 9een used in A'F unit root tests
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