Determinants Of Non-performing Loans in Pakistan

Tanweer Islam; Faiza Zafar; Naimal Fatima; Nayab Tahir

doi:10.20944/preprints202007.0682.v1

Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Version 1 : Received: 27 July 2020 / Approved: 28 July 2020 / Online: 28 July 2020 (12:34:23 CEST)

Many countries have been facing the problem of bank insolvency across the globe. Asset deterioration is one of the main reasons for insolvency of banks. The objective of the paper is to ascertain the determinants of nonperforming loans (NPLs) in the banking sector of Pakistan for the period 2006-16. Other than the bank specific and macro variables proposed by the literature, the roles of weighted maturity and output gap are for the first time examined. We find significant impact of output gap on NPLs however weighted maturity has insignificant role in shaping the future NPLs. Bank specific drivers of NPLs include bank size and capital adequacy ratio.

Business fluctuations; financial stability; output gap; weighted maturity

Business, Economics and Management, Economics

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Determinants Of Non-performing Loans in Pakistan

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