Corruption's impact on non-performing loans of banks in emerging markets: Empirical insights

Purpose: This study investigates the impact of control of corruption (COC) on nonperforming loans (NPLs) in South Asian countries. Methodology: The present study selected three South Asian countries (Pakistan, India, and Bangladesh) from 2000 to 2019. Further, the current research employed the fixed effect model (FEM) analysis on a sample of 81 conventional banks based in South Asian countries. Findings: The result reveals that control of corruption has a significant and negative association with NPLs, indicating that weak control of corruption would lead to an increase in NPLs in the sample countries. Implications: The findings provide insights to the policymakers in making strategic decisions about NPLs regarding control of corruption impact. Originality: The significant increase in NPLs is worrying as it may undermine banks’ ability to grant credit and support a country's economic recovery. The increasing trend of NPL rates and limited studies in related literature assessing NPLs in the South Asian region has motivated this study, which examines the external and internal factors that may influence NPLs.