Does bank supervision impact nonperforming loans: cross-country determinants using agregate data ?
Abdelkader Boudriga, Neila Boulila and Sana Jellouli MPRA Paper from University Library of Munich, Germany Abstract: The paper empirically analyses the cross-countries determinants of nonperforming loans and the potential impact of regulatory factors on credit risk exposure. We employ aggregate banking, financial, economic and legal environment data for a panel of 59 countries over the period 2002-2006. Empirical results indicate that higher capital adequacy ratio and prudent provisionning policy seem to reduce the level of problem loans. We also report a desirable impact of private ownership, foreign participation and bank concentration. Our findings do not support the view that market discipline leads to better economic outcomes and to reduce the level of problem loans. In contrast, all regulatory devices either exert a counterproductive impact on bad loans or do not significantly enhance credit risk exposure for countries with weak institutions, corrupt business environment and litt