Title: Determination of influential financial factors on non-performing loans: evidence from Turkey

Authors: Mustafa Tevfik Kartal; Özer Depren; Serpil Kılıç Depren

Addresses: Strategic Planning and Investor Relations Directorate in Borsa İstanbul, Reşitpaşa Mah. Borsa İstanbul Cad., No. 4, Sarıyer, İstanbul, 34467, Turkey ORCID: 0000-0001-8038-8241 ' Customer Experience Researches Directorate in Yapı Kredi Bank, Büyükdere Cad. Yapı Kredi Plaza D Blok, Levent, İstanbul, 34330, Turkey ORCID: 0000-0001-8948-5742 ' Department of Statistics, Yıldız Technical University, Çifte Havuzlar Mah. Eski Londra Asfaltı Cad., No. 181, Esenler, İstanbul, 34220, Turkey ORCID: 0000-0003-4737-7131

Abstract: Turkish banking sector (TBS) has been faced with a growth of the rate of non-performing loans (NPL) over recent years. The level of NPL plays a restricting role of credit providing capacity of banks. So, necessary financing for economic growth cannot be provided and hence a variety of uncertainties and deteriorations in macro economy have been seen in Turkey. In this context, determination of factors affecting of NPL increasing is required to keep under control. Therefore, this study presents the critical factors on NPL by using 14 variables, quarterly data for the period of 2003Q1-2019Q2, and the multivariate adaptive regression splines (MARS) method. The results provide the evidence that the commercial credit interest rates, provisions, risk-weighted assets (RWA), credits, legal equity, net profits, and EUR/TL are the most influential factors on NPL, respectively.

Keywords: financial factors; MARS; multivariate adaptive regression splines; NPL; non-performing loans; Turkey.

DOI: 10.1504/IJMEF.2020.112193

International Journal of Monetary Economics and Finance, 2020 Vol.13 No.6, pp.569 - 584

Received: 20 May 2020
Accepted: 24 Aug 2020
Published online: 04 Jan 2021 *

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