Does country risk impact the banking sectors’ non-performing loans? Evidence from BRICS emerging economies

Financial Innovation

Research

Seyed Alireza Athari¹  Panteha Farmanesh²  Chafic Saliba³ 

[1] Department of Business Administration, Faculty of Economics and Administrative Sciences, Cyprus International University, Nicosia, Northern Cyprus, Turkey;Department of Business, Girne American University, Kyrenia, Northern Cyprus, Turkey;Department of Business, Girne American University, Kyrenia, Northern Cyprus, Turkey;Department of Business, Holy Spirit University of Kaslik, Kaslik, Lebanon;

关键词: Credit risk;    Country risk;    BRICS;    Emerging markets;    Banking sector;    Political risk;    Quantile regression;    E51;    E58;    G21;   

DOI  :  10.1186/s40854-023-00494-2

 received in 2022-09-15, accepted in 2023-04-13,  发布年份 2023

来源: Springer

【 摘 要 】

This study aims to fill the gap in the literature by specifically investigating the impact of country risk on the credit risk of the banking sectors operating in Brazil, Russia, India, China, and South Africa (BRICS), emerging countries. More specifically, we explore whether the country-specific risks, namely financial, economic, and political risks significantly impact the BRICS banking sectors’ non-performing loans and also probe which risk has the most outstanding effect on credit risk. To do so, we perform panel data analysis using the quantile estimation approach covering the period 2004–2020. The empirical results reveal that the country risk significantly leads to increasing the banking sector’s credit risk and this effect is prominent in the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.105, Q.50 = − 0.131, Q.75 = − 0.153, Q.95 = − 0.175). Furthermore, the results underscore that an emerging country’s political, economic, and financial instabilities are strongly associated with increasing the banking sector’s credit risk and a rise in political risk in particular has the most positive prominent impact on the banking sector of countries with a higher degree of non-performing loans (Q.25 = − 0.122, Q.50 = − 0.141, Q.75 = − 0.163, Q.95 = − 0.172). Moreover, the results suggest that, in addition to the banking sector-specific determinants, credit risk is significantly impacted by the financial market development, lending interest rate, and global risk. The results are robust and have significant policy suggestions for many policymakers, bank executives, researchers, and analysts.

【 授权许可】

CC BY   
© The Author(s) 2023

【 图 表 】

40854_2023_494_Article_IEq2.gif

40517_2023_256_Article_IEq81.gif

Fig. 7