An essay on common and private value actions and essays on the effect of non-performing loans on lending, sectoral credit composition and banking sector market concentration

In the first part, we study a k +1st price auction model where each bidder is either a common value bidder or a private value bidder with a given probability. We show that as opposed to pure common value auctions, there has to be pooling in any equilibrium under some parametric restrictions depending on the number of goods, distribution of signals and probability of a bidder belonging to either type. We find a large auction equilibrium in which common value bidders pool at the bottom of the signal space. The price in equilibrium does not converge the true value of the object; however, it does reflect the state of the world. We also provide some conditions for a pooling equilibrium in large and small auctions with common and private value bidders. In the second part, we study the interaction of non-performing loans (NPL) and credit growth. The period of tightening in monetary and financial conditions around the globe following the COVID-19 pandemic threatens the asset quality of banks worldwide. An analysis of the feedback e↵ects between non-performing loans and credit growth is therefore important for economic growth projections and for the financial stability of banking system. This study analyzes the impact of changes in bank asset quality on lending, market concentration and economic sector loan distribution in Turkey by implementing panel VAR on bank level and economic sector level data. In the first part, we show that rise in the NPL ratio of banks decreases the bank loans. We distinguish the response of public and private banks to NPL rise before and after 2016. We also examine the role of bank characteristics, such as size, capital and liquidity structure to demonstrate how banks react di↵erently to NPL shocks with respect to these characteristics. Moreover, we provide a panel quantile estimation of the e↵ect of NPL in di↵erent quantiles of bank loan distribution and show that tightening in bank lending due to NPL shocks is more pronounced at the higher quantiles of loan distribution. Second, we work on panel data of economic sectors to show that when NPL ratio of a sector increases, share of outstanding loans of the sector in total bank loans shrinks. We find that the direction, magnitude and duration of the response of loans to NPL shock is consistent with bank-level analysis, with medium to long-term loans the main driver of the response. Third, we demonstrate using classical VAR that an exogenous rise in the NPL ratio increases the market concentration in the banking sector, with concentration being driven by public banks. Sectoral level analysis of NPL feedback mechanism, quantile regression approach to interaction of NPL with lending and interaction of NPL with banking sector concentration indices are novel results with possible policy implications.