The impact of non-performing loans on systematic risk of banks. Evidence from the European market

This paper investigates the impact of non-performing loan data on the perceived riskiness of banks, providing information to manage them. We used the quantitative methodology based on statistical analysis to represent the role of non-performing loans. We built our sample starting from European listed banks. We developed a regression analysis establishing the relationship between non-performing data and risk. Our results show achievements in the impact of the non-performing loans (NPLs) ratio on perceived risk, particularly on the beta factor. The positioning of non-performing loan data is directed to influence capital asset pricing model (CAPM) beta. In the European banks of the analysis, a higher value of NPL ratio brings to a higher perception of risk by the market, and this is central for the future management of NPLs.