Non-performing loans and asset management companies in Turkey

Abstract

The objective of this thesis is to describe historical evolution of Turkey’s NPL levels and NPL disposal management in detail and show bank-specific factors affect banks’ NPL sale decisions. Despite the wide literature on NPLs, most of them are focused on determinants of NPLs, either macro or micro determinants. However, our empirical analysis examines the effect of bank-specific metrics, NPL ratio, credit growth, capital adequacy ratio and collection performance, on NPL disposal performance of a bank. A panel dataset is compiled containing annual data of bank specific factors and NPL sale performance from 2005 to 2018 for twenty-four banks. Fixed effect model is used for panel data analysis. As a result of the estimations, I find that previous year’s NPL amount and ratio significantly increase NPL sale performance of a bank while increase in previous year’s capital adequacy ratio and collection performance are associated with decline in NPL sale performance of a bank.