Theories on Credit Market, Credit Risk and Economic Activity

2007 ◽  
pp. 27-48
Keyword(s):  
Credit Risk ◽  
Economic Activity ◽  
Credit Market

Debt and Corporate Governance

2015 ◽  
Author(s):  
Charles K. Whitehead
Keyword(s):  
Corporate Governance ◽  
Credit Risk ◽  
Credit Market ◽  
Lending Relationships ◽  
Private Credit ◽  
Traditional Function ◽  
Over Time

This chapter focuses on the evolving role of debt as a tool of corporate governance, or debt governance, within the context of developments in the private credit market. It first discusses debt’s traditional function, with particular emphasis on illiquid loans and the lenders’ reliance on monitoring and covenants in order to manage a borrower’s credit risk. It then considers how loans and lending relationships have evolved over time in light of the increased liquidity of traditionally private instruments. One outcome for debt governance may be a shift from the traditional dependence on covenants and monitoring to a greater reliance on the disciplining effect of liquid credit instruments.

scholarly journals The Effect of Systematic Default Risk on Credit Risk Premiums

2019 ◽  
Vol 11 (21) ◽  
pp. 6039
Author(s):  
Kim
Keyword(s):  
Credit Risk ◽  
Cross Section ◽  
Default Risk ◽  
Credit Default Swap ◽  
Credit Market ◽  
Testable Hypothesis ◽  
Risk Premiums ◽  
Positive Effects ◽  
Market Factors ◽  
Default Risks

This study examines whether systematic default risks affect a cross section of credit risk premiums. Using a structural framework, I derive a theoretical cross-sectional relationship, develop a testable hypothesis, and provide a method to estimate the systematic default risk. The empirical results of US corporate credit default swap data are consistent with my hypothesis. The findings show that, while credit market factors have positive effects on a cross section of credit risk premiums, stock market factors have a negative impact. Regression analyses reveal that the market’s average default probability and the value factor have a significant effect on the credit risk premium. In addition, credit market factors are more influential than equity market factors as systematic default risk factors. The results suggest that systematic and idiosyncratic default risks are priced differently in a cross section of credit risk premiums.

scholarly journals Determinants of Loan Quality: Lessons from Greek Cooperative Banks

2016 ◽  
Vol 9 (1) ◽  
pp. 115-140
Author(s):  
Vasiliki Makri ◽  
Konstantinos Papadatos
Keyword(s):  
Credit Risk ◽  
Public Debt ◽  
Economic Activity ◽  
Loan Loss ◽  
Explanatory Variables ◽  
Regression Techniques ◽  
Cooperative Banks ◽  
Loan Quality ◽  
Accounting Ratios ◽  
Macroeconomic Environment

AbstractThe article focuses on the credit risk of cooperative banks in Greece. The main objective is to define which factors are responsible for variations in loan quality during the period 2003-2014. Loan quality is measured by Loan Loss Reserves Ratio (LLR) and dynamic regression techniques are implemented for the econometric estimations. The outlined results suggest that the macroeconomic environment (i.e. public debt, local unemployment, economic activity and inflation) and the accounting ratios (i.e. past loan quality and profitability) seem to be the explanatory variables of problem loans.

scholarly journals The issue and importance of credit risk management exemplfied by the collapse of American mortgage credit market

Equilibrium ◽  
2008 ◽  
Vol 1 (1-2) ◽  
pp. 113-126
Author(s):  
Karolina Przenajkowska
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Credit Market ◽  
Risk Identification ◽  
Steering Control ◽  
Credit Risk Management ◽  
Economic Activities ◽  
Negative Effects ◽  
International Financial Crisis ◽  
Mortgage Credit

The risk is connected to all types of economic activities. It is especially important for the functioning of banks, which are institutions based on society trust. The most common risk banks face is the credit risk. The first part of the paper refers to the reasons, classification and consequences of its appearance. Serious negative effects of credit risk existence force banks to design a program of managing this type of risk. The credit risk management is founded on the basis of the credit policy established separately in every bank. This policy requires choosing the policy towards the risk. Generally, there are three such policies or strategies: conservative, offensive and controlled growth. The process of credit risk management in the paper is presented as a division on five elements (risk: identification, assessment, steering, control, financing and administrating). Those issues are particularly important with the international financial crisis observed since August 2007. The origin of the crisis is linked to the collapse of the American mortgage credit market. The analysis of the reasons behind this collapse is described in the last part of the paper. It shows the points where the most basic rules of the credit risk management were ignored and leaves the question of the conclusions for the banks all over the world.

scholarly journals ECONOMIC ACTIVITY, CREDIT MARKET CONDITIONS, AND THE HOUSING MARKET

2017 ◽  
Vol 22 (7) ◽  
pp. 1769-1789 ◽  
Author(s):  
Luca Agnello ◽  
Vitor Castro ◽  
Ricardo M. Sousa
Keyword(s):  
Housing Market ◽  
Economic Activity ◽  
Hazard Function ◽  
Credit Market ◽  
European Countries ◽  
Market Conditions ◽  
Industrial Countries ◽  
Housing Boom ◽  
Main Determinants ◽  
Using Data

In this paper, we assess the characteristics of the housing market and its main determinants. Using data for 20 industrial countries over the period 1970Q1–2012Q2 and a discrete-time Weibull duration model, we find that the likelihood of the end of a housing boom or a housing bust increases over time. Additionally, we show that the different phases of the housing market cycle are strongly dependent on the economic activity, but credit market conditions are particularly important in the case of housing booms. The empirical findings also indicate that although housing booms have similar lengths in European and non-European countries, housing busts are typically shorter in European countries. The use of a more flexible specification for the hazard function that is based on cubic splines suggests that it evolves in a nonlinear way. From a policy perspective, our study can be useful for predicting the timing and the length of housing boom–bust cycles. Moreover, it highlights the importance of monetary policy by influencing lending rates and affecting the likelihood of occurrence of housing booms.

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