This paper analyses the effects of non-performing loans (NPLs) on the cost of capital, and on lending and liquidity supply, for a sample of 225 Eurozone banks over the period 2002Q1-2016Q4. Our results demonstrate that NPLs increase the cost of capital, which reduces both lending supply and liquidity creation. This phenomenon is comparatively more significant for periphery county banks than for core country banks.
Gabriella Chiesa, José Manuel Mansilla-Fernández (2019). Disentangling the transmission channel NPLs-cost of capital-lending supply. APPLIED ECONOMICS LETTERS, 26(16), 1333-1338 [10.1080/13504851.2018.1558335].
Disentangling the transmission channel NPLs-cost of capital-lending supply
Gabriella Chiesa;José Manuel Mansilla-Fernández
2019
Abstract
This paper analyses the effects of non-performing loans (NPLs) on the cost of capital, and on lending and liquidity supply, for a sample of 225 Eurozone banks over the period 2002Q1-2016Q4. Our results demonstrate that NPLs increase the cost of capital, which reduces both lending supply and liquidity creation. This phenomenon is comparatively more significant for periphery county banks than for core country banks.File in questo prodotto:
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