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An Investigation into the Socio-Political and Legal Determinants of Non-Performing Bank Loans

Muhammad Farhan, Prof. Dr. Hassan Mobeen Alam
Hailey College of Commerce, University of the Punjab, Lahore Pakistan
Lect. Shaista Jabeen
Lahore College for Women University Lahore, Pakistan

The growth of non-performing bank loans in developing and developed economies has added fuel to bank’s failure fire. Banking failures not only hurt economy of a single country but also hamper the global economy. The suppression of non-performing bank loans is a compulsory condition for the economic growth. If these non-performing bank loans are not controlled and continuously rolled over, the resources are jammed in unsuccessful (unprofitable) sectors; thus, jamming the economic expansion and damaging the economic efficiency. Furthermore, substantial increase in credit risk has devastating impact on foreign trade. This study is based on survey approach about socio-political and legal determinants of nonperforming loans in banking sector. For this study, Primary data has been collected through questionnaire from 318 professional bankers who make/supervise lending decisions. Correlation and multiple regression analysis have been used to test the impact of selected variables (Negative Personal Intentions, Political Influence, Banker’s Incompetence and Inefficient judicial system and executive) on non-performing bank loans and to analyze the primary data retrieved from the bankers. Results indicate that all independent variables (Negative Personal Intentions, Political Influence, Banker’s Incompetence and Inefficient judicial system and executive) have a significant positive relationship with the non-performing bank loans. In the end, this study provides some policy implications and suggestions to control the increasing non-performing bank loans for the betterment of world economy.

Keywords: Non-performing bank Loans, Social Determinants, Corruption, Political Influence, Judicial System
JEL Code: G, G21

II. InTradersUluslararası Ticaret Kongresi Kongre Kitabı
The Second InTraders International Conference on International Trade Conference Book editör: Kürşat Çapraz
İstanbul: Hiperlink Yayınları, 2018.

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