Do Spatial Spillover Effects of Nonperforming Loans for Commercial Banks Exist? Evidence from Chinese Provinces

Abstract

ABSTRACTIn this article, the spatial spillover effects of nonperforming loans in commercial banks are investigated based on Chinese provinces. Panel data from 31 provinces in China covering the period from 2005 to 2014 are used in this study. First, we employ Moran’s I statistic to describe the empirical evidence for the presence of spatial dependencies in provincial nonperforming loans ratio (NPLR) after checking the stationarity of the data by the second-generation panel unit root tests. Then we construct the spatial panel data model through a set of model specification tests, and calculate the direct and indirect effects of the explanatory variables. The empirical results show that the spatial spillover effect plays a significant role in regional nonperforming loans. Furthermore, the growth rate of the gross domestic product and the unemployment rate are two important factors in the transmission of nonperforming loans among the regions.