Does Corruption Affect Non-Performing Loans in Central and Eastern Europe?

The objective of this study is to examine the effect of corruption on non-performing loans in 17 Central and Eastern European countries from 2004 to 2021. The study investigates the influence of corruption on the incidence of non-performing loans while controlling for macroeconomic, bank-specific, and governance-related factors. The analysis is based on panel data, and the fixed effects method is applied. The results indicate that several variables, including corruption, unemployment, loan-to-deposit ratio, voice and accountability index, and credit growth significantly affect nonperforming loans. The findings contribute to the existing literature by examining the role of external factors in the persistence of nonperforming loans, revisiting this issue in the specific context of the Central and Eastern European region.