Elections and bank non-performing loans: Evidence from developed countries

Peterson K. Ozili (1)
(1) Central Bank of Nigeria, Nigeria

Abstract

The existing literature has not examined how elections affect bank non-performing loans and its determinants even though banks are often the largest borrowers to fund election campaigns in many countries. This study investigates the determinants of bank non-performing loans (NPL) during election years in 35 developed countries. The fixed effect regression methodology was used to estimate the determinants of bank non-performing loans during election years. It was found that the banking sector experienced high NPLs during election years. Efficient banks operating in robust legal environments have higher non-performing loans during election years. It was also found that capital adequacy ratio, real GDP growth, loan-to-GDP ratio, cost-to-income ratio, political stability, and absence of terrorism are significant determinants of bank non-performing loans. The findings imply that election matters for the persistence of bank non-performing loans in developed countries.


 

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Authors

Peterson K. Ozili
pkozili@cbn.gov.ng (Primary Contact)
Author Biography

Peterson K. Ozili, Central Bank of Nigeria

Central Bank of Nigeria, Abuja, Nigeria, email: pkozili@cbn.gov.ng

Ozili, P. K. (2024). Elections and bank non-performing loans: Evidence from developed countries. Modern Finance, 2(2), 63–79. https://doi.org/10.61351/mf.v2i2.175

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