The impact of non-performing loan sales on the stock market: The role of corporate governance in an emerging market

PİRGAİP B., Uysal A.

Borsa Istanbul Review, vol.23, no.3, pp.674-684, 2023 (SSCI) identifier

  • Publication Type: Article / Article
  • Volume: 23 Issue: 3
  • Publication Date: 2023
  • Doi Number: 10.1016/j.bir.2023.01.006
  • Journal Name: Borsa Istanbul Review
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, EconLit, Directory of Open Access Journals
  • Page Numbers: pp.674-684
  • Keywords: Asset management companies, Banks, Corporate governance, Event study, Nonperforming loans
  • Hacettepe University Affiliated: Yes


Over the past decade, one popular way for Turkish banks to remove nonperforming loans (NPLs) from their balance sheets has been to sell them to asset management companies. We examine the short-term market reaction to the announcements of such NPL sales over the period 2009–2019. We also consider the role of corporate governance in these transactions. To do so, we compare banks included in the Corporate Governance Index (XCORP) with other banks. Our event-study results suggest that the market reacts positively to NPL sales and that this reaction is more pronounced when the selling bank has better corporate governance. More important, the stocks of these banks are efficiently priced, while the non-XCORP banks have significant information leakage. We further find that good corporate governance is a key determinant of the relationship between the valuation effect of NPL sales announcements and the size/transactional properties of NPL portfolios.