Giannoulakis, Michail (2025) Macroeconomic determinants of NPLs and strategic default. [Working Paper] (Unpublished)

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Abstract

This paper explores the macroeconomic impact of strategic default on non-performing loans (NPLs), addressing a key gap in existing research. Using a novel strategic default proxy developed via principal component analysis (PCA) and a dynamic panel data model, the study reveals a complex temporal relationship. Initially, shocks to strategic defaults lead to a short-term decline in NPL growth, reflecting financial adjustments or delays in recognition, but are followed by a persistent upward trend that significantly weakens loan portfolio quality and financial stability. These findings highlight the need for timely interventions to address misleading short-term stability and mitigate long-term risks. The study also underscores the importance of incorporating behavioural and institutional factors, such as uncertainty and banking leverage, into NPL modelling.

Item Type:	Working Paper
Uncontrolled Keywords:	non-performing loans, strategic default, financial contagion, bank leverage, economic uncertainty, principal component analysis, Panel VAR
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HG Finance
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	10 Nov 2025 18:26
URI:	https://gala.gre.ac.uk/id/eprint/51492

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