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 non-performing loans. The findings contribute to the existing literature by examining the role of external factors in the persistence of non-performing loans, revisiting this issue in the specific context of the Central and Eastern European region.