Does Banking Concentration Affect Non-Performing Loans in Albania?

Arjan Tushaj, Valentina Sinaj
European Research Studies Journal, Volume XXIII, Special Issue 1, 1074-1083, 2020
DOI: 10.35808/ersj/1871


Purpose: The article examines the correlation among banking concentration and non – performing loans using datasets of Albanian banking sector during 2005 - 2017. We investigated the non – performing loans affected by market structural variables, banking variables and macroeconomic variables. Approach/Methodology/Design: Test of loan concentration impact on non – performing loans through linear models provided the significant results. Findings: Albanian banking sector proved the ambiguous results and the sound correlation in long run among concentration and non – performing loans. Outcome confirmed the negative effect of return on assets and average loan interest rate on non- performing. Meanwhile the total loans, exchange rates and Gross Domestic Production affected positively the non-performing loans. Practical Implications: Albanian banking sector operated to moderate concentration despite of bank’s mergers recently. It has linked to the increasing non – performing loans ratio past the last quarter of 2008.We demonstrated the empirical impacts that they ought to take into consideration by banking sector. Originality/Value: The research provides empirical results encouraging further investigations on banking sector.

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