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<p>A high level of non-performing loans (NPLs) indicates poor lending practices and undermines banks’ reputations with regulators, customers, and investors. A strong reputation offers banks a competitive edge. Guided by signaling theory, this study investigates the impact of NPLs on the reputational standing of banks in a competitive market. The sample comprises 244 banks listed on the New York Stock Exchange, selected using specific inclusion criteria and purposive sampling. The study analyzes data spanning 18&#xa0;years (2006–2023), sourced from Thomson Reuters Eikon DataStream. Advanced estimation techniques, including Feasible Generalized Least Squares (FGLS) and the Generalized Method of Moments (GMM), were employed. The results show that NPLs have a significant negative effect on bank reputation. Moreover, the interaction of NPLs with corporate governance quality, bank size, and bank age positively and significantly influences reputation. To reduce NPLs, banks should strengthen credit risk management by adopting advanced risk assessment tools and enforcing stricter loan approval standards.</p>

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The impact of non-performing loans on banks’ reputation: evidence from the New York Stock Exchange

  • 期刊论文

  • 发表日期：

    2026年5月9日

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  • Leviticus Mensah,
  • Richard Arhinful,
  • Hayford Asare Obeng,
  • Bright Akwasi Gyamfi

摘要

A high level of non-performing loans (NPLs) indicates poor lending practices and undermines banks’ reputations with regulators, customers, and investors. A strong reputation offers banks a competitive edge. Guided by signaling theory, this study investigates the impact of NPLs on the reputational standing of banks in a competitive market. The sample comprises 244 banks listed on the New York Stock Exchange, selected using specific inclusion criteria and purposive sampling. The study analyzes data spanning 18 years (2006–2023), sourced from Thomson Reuters Eikon DataStream. Advanced estimation techniques, including Feasible Generalized Least Squares (FGLS) and the Generalized Method of Moments (GMM), were employed. The results show that NPLs have a significant negative effect on bank reputation. Moreover, the interaction of NPLs with corporate governance quality, bank size, and bank age positively and significantly influences reputation. To reduce NPLs, banks should strengthen credit risk management by adopting advanced risk assessment tools and enforcing stricter loan approval standards.