Title: Does leverage influence banks' non-performing loans? Evidence from India
Abstract:Abstract The study examines the association between corporate leverage and banks' non-performing loans. Using data on Indian manufacturing sector in India for 1993–2004, the findings indicate lagged l...Abstract The study examines the association between corporate leverage and banks' non-performing loans. Using data on Indian manufacturing sector in India for 1993–2004, the findings indicate lagged leverage to be an important determinant of bad loans of banks. In terms of magnitudes, a 10 percentage point rise in the corporate leverage is, on average, associated with 1.3 percentage point rise in sticky loans relative to loans, after a one period lag. In terms of policy implications, the analysis suggests that the leverage ratio can serve as a useful signpost of asset quality and second, the analysis points to the need to improve the collection of data from the corporate sector. Acknowledgements An earlier draft of the paper was presented at the IGIDR Conference on Money and Finance in the Indian Economy in February 2005. I would like to thank, without implicating, the seminar participants, and especially, Prof. Benjamin Friedman, Prof. D. M. Nachane, K. Ramachandran, B. Kamaiah, Kaushik Chaudhuri, Golaka Nath and Y. P. Gupta for their incisive comments on an draft. The views expressed and the approach pursued in the paper reflects the personal opinion of the author.Read More
Publication Year: 2005
Publication Date: 2005-12-15
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 43
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