TAILIEUCHUNG - Non-performing loans and housing prices in Taiwan

We set out in this study to empirically examine the relationship between house prices and bank stability based upon an exploration of quarterly data obtained from Taiwanese banks covering the years 2006 to 2015. There are various divergent views on the ways in which persistent rises in house prices can influence ‘non-performing loans’ (NPLs); one view is that when house prices rise, this may raise collateral value, and as a result, NPLs will be reduced, whilst an alternative view is that increasing house prices may give rise to issues of moral hazard and adverse selection, thereby leading to an overall increase in NPLs and greater accumulation of risky assets within the banks. The results of the dynamic panel data analysis carried out in this study reveal the existence of a long-run, negative relationship between NPL ratios and the housing price index; however, no such negative relationship is discernible in the short run. Our findings offer policy implications for the emerging markets in the aftermath of the sub-prime mortgage crisis; according to our research results, policies aimed at reducing the duration of any housing market recession may improve bank stability. | Journal of Applied Finance Banking vol. 9 2019 57-66 ISSN 1792-6580 print version 1792-6599 online Scientific Press International Limited Non-performing Loans and Housing Prices in Taiwan Tsaubin Chen1 and Chiang Ku Fan2 Abstract We set out in this study to empirically examine the relationship between house prices and bank stability based upon an exploration of quarterly data obtained from Taiwanese banks covering the years 2006 to 2015. There are various divergent views on the ways in which persistent rises in house prices can influence non-performing loans NPLs one view is that when house prices rise this may raise collateral value and as a result NPLs will be reduced whilst an alternative view is that increasing house prices may give rise to issues of moral hazard and adverse selection thereby leading to an overall increase in NPLs and greater accumulation of risky assets within the banks. The results of the dynamic panel data analysis carried out in this study reveal the existence of a long-run negative relationship between NPL ratios and the housing price index however no such negative relationship is discernible in the short run. Our findings offer policy implications for the emerging markets in the aftermath of the sub-prime mortgage crisis according to our research results policies aimed at reducing the duration of any housing market recession may improve bank stability. JEL classification numbers C23 G21 Keywords Non-performing loans Bank-specific determinants Housing market 1 Department of International Business Shih Chien University Taiwan 2 Department of Risk Management and Insurance Shih Chien University Taiwan Article Info Received May 13 2019. Revised July 10 2019 Published online September 10 2019 58 Tsaubin Chen Chiang Ku Fan 1. Introduction The primary aim of this study is to identify the determinants of non-performing loans NPLs in the aftermath of the 2008 sub-prime mortgage crisis. Virtually all countries around the world experienced .

• Ngân hàng - Tín dụng
• Non performing loans
• Bank specific determinants
• Housing market
• Housing prices in Taiwan
• Persistent rises in house prices
• Nonperforming loans
• Dynamic panel data
• GMM model
• Dynamic panel data methods
• Vietnam’s commercial banks
• Economics and business
• Capital adequacy
• Stress testing
• Vector autoregressive model
• Commercial banks credit risk
• The directional output distance function
• Shadow price of nonperforming loans
• Technical efficiency
• Chinese banks
• Post crisis era