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Corporate stress and bank nonperforming loans: evidence from Pakistan

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journal contribution
posted on 2023-04-05, 09:15 authored by M Ali ChoudharyM Ali Choudhary, Anil K Jain

Using detailed administrative Pakistani credit registry data, we show that banks with low leverage ratios are both significantly slower and less likely to recognize a loan as nonperforming than other banks that lend to the same firm. Moreover, we find suggestive evidence that this lack of recognition impedes loan curing, with banks with low leverage ratios reporting significantly higher final default rates than other banks for the same borrower (even after controlling for differences in loan terms). Our empirical findings are consistent with the theoretical prediction that classifying a nonperforming loan is more expensive for banks with less capital.

History

School

  • Business and Economics

Department

  • Economics

Published in

Journal of Banking & Finance

Volume

133

Publisher

Elsevier

Version

  • AM (Accepted Manuscript)

Rights holder

© Elsevier

Publisher statement

This paper was accepted for publication in the journal Journal of Banking & Finance and the definitive published version is available at https://doi.org/10.1016/j.jbankfin.2021.106234

Acceptance date

2021-06-26

Publication date

2021-07-02

Copyright date

2021

ISSN

0378-4266

eISSN

1872-6372

Language

  • en

Depositor

Prof Ali Choudhary. Deposit date: 4 April 2023

Article number

106234

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