Capital regulation and insured banks choice of individual loan default risks

To ensure price and economic stability, the central bank of Nigeria has adopted several unconventional monetary policy measure such as MSMEs credit intervention with the aim of boosting credit availability in specific sector of the economy. The intuition is that rise in productive activities/investment will indirectly promotes price stability the core mandate of the bank. Therefore, this study investigated the challenges facing implementation of real sector (MSMEs) intervention programmes of the CBN since year 2000 to 2020. The study employed mixed method using descriptive survey approach to sample 62 intervention programme implementers and 400 Micro, Small and Medium Sized Enterprises (MSMEs). The findings reveal among others that high loan default risks, politicization of programmes, and inadequate infrastructural development are the leading challenges facing programme implementers in Nigeria. Applicants' non-eligibility in programmes applied for, poor business plan or inadequate knowledge in proposed business topped the reasons for failures among applicant MSMEs. Consequently, a need for more public-private partnerships in programme design, monitoring, and evaluation to forestall political interference is advised.

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Earnings Smoothing and Bankruptcy Risk in Liquidating Private Firms

Asian Journal of Finance & Accounting ◽

10.5296/ajfa.v10i1.12904 ◽

2018 ◽

Vol 10 (1) ◽

pp. 162

Author(s):

Nor Afifah Shabani ◽

Saudah Sofian

Keyword(s):

Interest Rates ◽

Stock Price ◽

Crash Risk ◽

Private Firms ◽

Loan Default ◽

Bankruptcy Risk ◽

Public Firms ◽

Earnings Smoothing ◽

Distressed Firms ◽

Default Risks

Smooth earnings are preferred by managers and creditors because they represent a stable business operations as well as low loan default risks and thus creditors reward firms which have smooth earnings with better loan covenant terms and lower interest rates. Nonetheless, recent literature shows that earnings smoothing in public firms is associated with stock price crash risk. Using Altman Z” score to measure firm’s specific bankruptcy risk, this study examines the association between accrual earnings smoothing and bankruptcy risk in liquidating private firms in UK and finds that earnings smoothing significantly negatively affects those firms' bankruptcy risk. The finding implies that financially distressed firms engage with less earnings smoothing, possibly because they do not have the opportunity to engage in accrual earnings smoothing anymore. Nonetheless, further examination shows that these firms engage less with earnings smoothing because they are being monitored by external creditors, indicated by significantly high leverage during the last period before they are being liquidated.

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How Does the Urgency of Borrowing in Text Messages Affect Loan Defaults? Evidence from P2P Loans in China

Security and Communication Networks ◽

10.1155/2021/4060676 ◽

2021 ◽

Vol 2021 ◽

pp. 1-13

Author(s):

Hong Liu ◽

Mingkang Yuan ◽

Meiling Zhou

Keyword(s):

Information Asymmetry ◽

Significant Negative Correlation ◽

Text Messages ◽

Loan Default ◽

Loan Repayment ◽

Text Length ◽

Text Information ◽

Default Risks ◽

Loan Defaults ◽

Default Data

In P2P loans with information asymmetry, the text information described by the borrower plays an important role in alleviating the information asymmetry between borrowers and lenders. To explore the borrowing described in text information and its relationship with default behavior, this article selects credits from April 2014 to October 2016 as the repayment period and studies default data. This is performed based on the length of the excavated text, purpose of the loan, repayment ability, willingness to reimburse, five text variables, and degree of loan urgency. The empirical results show that text length has a significant negative correlation with the default probability of borrowers. Different loan purposes have different default risks. Interestingly, the more urgent a loan is, the more likely the borrower is to default. However, repayment ability information and repayment willingness information have no significant effect on default behavior. In addition, the Nagelkerke R2 improved by nearly 3% in the logistic regression model with the addition of text variables. In short, fully excavating loan description information is helpful in reducing the risk of loan default.

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COVID-19 crisis raises leveraged loan default risks

Emerald Expert Briefings ◽

10.1108/oxan-db252843 ◽

2020 ◽

Keyword(s):

Mutual Funds ◽

World Market ◽

Insurance Companies ◽

Structured Finance ◽

Loan Default ◽

Content Type ◽

The Us ◽

Default Risks ◽

Investment Grade ◽

Different Levels

Subject The market for leveraged loans. Significance Low-rated, heavily indebted companies typically raise money through leveraged loans because they cannot access investment-grade debt. The issuance of leveraged loans has surged since 2008, increasing their systemic importance. Structured finance products known as collateralised loan obligations (CLOs) are the largest buyer of leveraged loans. An asset manager typically buys 100-300 loans and packages them into tranches of bonds representing different levels of risk and return. The US CLO market has more than doubled since 2008 and represents 75% of the world market. Impacts The exposure of insurance companies, pension funds and mutual funds to losses is mounting. As defaults and bankruptcies increase, investors could have to sell other types of assets to meet redemptions or preserve capital. Eventual interest rate rises will help ease the pressure on loans and CLOs, as they are both linked to floating, rather than fixed, rates.

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Debt Traps - A Risk Participative Loom for Reduction of Default Risk using Numeric Game Theory

International Journal of Recent Technology and Engineering - 2 ◽

10.35940/ijrte.a1257.059120 ◽

2020 ◽

Vol 9 (1) ◽

pp. 87-93

Keyword(s):

Default Risk ◽

Maturity Model ◽

Theoretic Approach ◽

Loan Default ◽

Capability Maturity ◽

Credit Default ◽

Game Theoretic ◽

Default Risks ◽

Education Delivery ◽

Game Theoretic Approach

Collaboration modeled as risk participation tends to reduce default risk and measures achievement within volatility parameters. This stimulates stakeholders to ensure regular repayment and build capability to create sustainable livelihoods for borrowers and profitable credit portfolios for lenders. This study attempts to create a working model of knowledge and education delivery system (Dr. Amartya Sen’s “Capability Maturity Model”) which not only analyzes credit default from a borrower’s perspective, but also seeks to mitigate a larger evil “SOCIAL EXCLUSION” (associated with loan default) that causes disequilibrium in poor tribal lives (Women). The model capitalizes associated variables using an analytical method to reduce default risks and applies the same to arrive at an equilibrium as per game theoretic approach. Using numerical analysis, the model seeks to identify risk dependency reductions in tribal Microfinance

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