scholarly journals Forecasting bank credit ratings

2014 ◽  
Vol 15 (2) ◽  
pp. 195-209 ◽  
Author(s):  
Periklis Gogas ◽  
Theophilos Papadimitriou ◽  
Anna Agrapetidou
Keyword(s):  
Credit Ratings ◽  
Financial Statements ◽  
Bank Credit ◽  
Probit Regression ◽  
Content Type ◽  
Explanatory Variables ◽  
Financial Variables ◽  
Annual Frequency ◽  
Available Information

Purpose – This study aims to present an empirical model designed to forecast bank credit ratings using only quantitative and publicly available information from their financial statements. For this reason, the authors use the long-term ratings provided by Fitch in 2012. The sample consists of 92 US banks and publicly available information in annual frequency from their financial statements from 2008 to 2011. Design/methodology/approach – First, in the effort to select the most informative regressors from a long list of financial variables and ratios, the authors use stepwise least squares and select several alternative sets of variables. Then, these sets of variables are used in an ordered probit regression setting to forecast the long-term credit ratings. Findings – Under this scheme, the forecasting accuracy of the best model reaches 83.70 percent when nine explanatory variables are used. Originality/value – The results indicate that bank credit ratings largely rely on historical data making them respond sluggishly and after any financial problems are already known to the public.

The use and determinants of credit derivatives in Italian banks

2014 ◽  
Vol 15 (4) ◽  
pp. 417-436 ◽  
Author(s):  
Eleonora Broccardo ◽  
Maria Mazzuca ◽  
Elmas Yaldiz
Keyword(s):  
Financial Distress ◽  
Economies Of Scale ◽  
Credit Derivatives ◽  
Financial Statements ◽  
Annual Reports ◽  
Probit Regression ◽  
Content Type ◽  
Before And After ◽  
The Usa ◽  
Available Information

Purpose – This paper aims to answer the following research questions: To what extent do banks use credit derivatives (CDs)? What are the differences between users and non-users? What are the main underlying motivations? Design/methodology/approach – The annual reports of 112 Italian banks are analysed during the 2005-2011 period. By estimating a probit regression model, two incentives for using CD are tested: managing credit risk, and increasing a bank’s income composition/diversification. Different sub-samples are considered. The motivations are further investigated to understand whether they vary before and after the crisis. Findings – A limited number of banks use CD and larger and listed banks are more likely to do so. The results do not support the hedging hypothesis. Signals pointing towards the financial distress hypothesis emerge. Less capitalised banks are more likely to use CD. For listed banks, the findings support the hypothesis that economies of scale exist. After the financial crisis, a number of determinants tend to gain significance, and a speculative driver emerges. Originality/value – Previous studies focus primarily on the USA, and single-country studies do not exist in the literature. Given the importance of risk management that the crisis has reinforced, investigating whether CD use has changed before and after the crisis is of interest. Given the incompleteness of the information on CDs, the paper contributes to increasing the available information on CDs by hand-collecting data from banks’ financial statements.

Financial health of Syariah and non-Syariah banks: a comparative analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Elok Heniwati ◽  
Nella Yantiana ◽  
Gita Desyana
Keyword(s):  
Comparative Analysis ◽  
Financial Stability ◽  
Influential Factors ◽  
Financial Health ◽  
Short Term ◽  
Liquid Asset ◽  
Content Type ◽  
Explanatory Variables ◽  
Insolvency Risk

Purpose This paper aims to investigate whether Syariah banks are more financially stable than non-Syariah banks and check the differential impact of explanatory variables in financial health and efficiency in the context of Indonesia. Design/methodology/approach By using unbalanced panel data from Bankfocus over the period 2011–2018, regression analysis is performed with two response variables representing financial health, ZSCORE for return on average assets, liquid asset to deposit and short-term funding ratio. A number of control variables are used as tools to confirm the hypotheses. To check the robustness of the findings, a model with different specifications has been used. Findings The results indicate that while Syariah banks present higher insolvency risk (less health) for long-term activity, the opposite is true for short-term activity. Other findings show that Syariah and non-Syariah banks contribute differently to the national system of financial stability owing to varying influential factors on the bank’s health. Originality/value This paper presents a comparative analysis between the financial stability of Syariah banks and that of non-Syariah banks in Indonesia by building an empirical framework that allows the author to examine the differential effects of each underlying feature on financial stability in Syariah and non-Syariah banks.

Cooking fuel choices of households in urban areas in Uganda: a multinomial probit regression analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Joseph Elasu ◽  
Bright Richard Richard ◽  
Muyiwa S. Adaramola
Keyword(s):  
Urban Areas ◽  
Sociodemographic Factors ◽  
Multinomial Probit ◽  
Probit Regression ◽  
Cooking Fuel ◽  
Content Type ◽  
Explanatory Variables ◽  
Section Data ◽  
Making Choices ◽  
Multinomial Probit Regression

PurposeThis study explores the economic and sociodemographic factors that influence households' decisions on the type of fuel used for cooking in urban areas in Uganda.Design/methodology/approachIn total, two cross-section data surveyed by the Uganda Bureau of Statistics (UBOS) in 2012/13 and 2016/17 were used to analyze consumption of energy for cooking purposes in urban areas of Uganda. This paper employed a multinomial probit regression model and the corresponding marginal effects to analyze cooking fuel choices, which are biomass, electricity and gas and kerosene combined.FindingsThe results showed that household expenditure was statistically significant for the choice of cooking fuel chosen. Furthermore, kitchen type, dwelling type and apartment tenure type are found to be significantly influence the choice of household cooking fuel decisions.Originality/valueThis study takes into consideration the combined influence of the kitchen type, dwelling and tenure type as explanatory variables for the choice of cooking fuel for households in urban areas in Uganda. These factors have not been considered in previous studies done in Uganda, especially within the context of urban households when making choices for cooking fuel.

Financial characteristics of takeover targets: a French empirical evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hicham Meghouar ◽  
Mohammed Ibrahimi
Keyword(s):  
Empirical Studies ◽  
Abnormal Returns ◽  
Control Group ◽  
Subprime Mortgage ◽  
Content Type ◽  
Financial Variables ◽  
Target Firms ◽  
Debt Capacity ◽  
Financial Characteristics ◽  
Available Information

PurposeThe purpose of this research is to highlight the financial characteristics of large French targets which were subject to takeovers during the period 2001–2007 and thereafter deduct the implicit motivations of acquirers.Design/methodology/approachUsing a global sample of 128 French listed companies (64 targets and 64 non-targets), the authors carried out Wilcoxon–Mann–Whitney testing and logistic regression in order to test nine hypotheses likely to discriminate between the two categories of companies (targets and non-targets).FindingsAccording to the results, target firms are more unbalanced in terms of growth resources and less rich in liquidity than their peers. They have unused debt capacity, offer greater opportunities for growth than firms in the control group and present low levels of value creation.Research limitations/implicationsThe main limitation of this study is regarding the sample size, limited by the exclusive use of large firms (deals of over $100m). The scope of this research could be broadened in future by including medium-sized companies.Practical implicationsThe authors believe that their results have two major implications. First, they enable market investors to achieve abnormal returns by investing in predicted targets through a portfolio of high takeover probability firms. Second, CEO of companies that are potentially targeted can assess their takeover likelihood in order to act and to manage such a situation for the benefit of their shareholders.Originality/valueThis research concerns the last wave of takeover prior to the subprime-mortgage financial crisis (2001–2007), a period that has not been sufficiently covered in empirical studies. This research contributes to the existing literature in two main respects. First, the results of this study improve our understanding of motivations for takeovers, particularly in the French context. Second, the introduction of new accounting and financial variables, not previously tested in the literature, enriches the available information concerning the profile of takeover targets.

scholarly journals Forecasting Credit Ratings of EU Banks

2020 ◽  
Vol 8 (3) ◽  
pp. 49
Author(s):  
Vasilios Plakandaras ◽  
Periklis Gogas ◽  
Theophilos Papadimitriou ◽  
Efterpi Doumpa ◽  
Maria Stefanidou
Keyword(s):  
Credit Rating ◽  
Credit Ratings ◽  
Support Vector ◽  
Credit Rating Agencies ◽  
Selection Scheme ◽  
Explanatory Variables ◽  
Rating Agencies ◽  
Financial Variables ◽  
Forecasting Models ◽  
Banking Institutions

The aim of this study is to forecast credit ratings of E.U. banking institutions, as dictated by Credit Rating Agencies (CRAs). To do so, we developed alternative forecasting models that determine the non-disclosed criteria used in rating. We compiled a sample of 112 E.U. banking institutions, including their Fitch assigned ratings for 2017 and the publicly available information from their corresponding financial statements spanning the period 2013 to 2016, that lead to the corresponding ratings. Our assessment is based on identifying the financial variables that are relevant to forecasting the ratings and the rating methodology used. In the empirical section, we employed a vigorous variable selection scheme prior to training both Probit and Support Vector Machines (SVM) models, given that the latter originates from the area of machine learning and is gaining popularity among economists and CRAs. Our results show that the most accurate, in terms of in-sample forecasting, is an SVM model coupled with the nonlinear RBF kernel that identifies correctly 91.07% of the banks’ ratings, using only 8 explanatory variables. Our findings suggest that a forecasting model based solely on publicly available financial information can adhere closely to the official ratings produced by Fitch. This provides evidence that the actual assessment procedures of the Credit Rating Agencies can be fairly accurately proxied by forecasting models based on freely available data and information on undisclosed information is of lower importance.

Value-added statement as a trigger to organizational unlearning

2019 ◽  
Vol 33 (6) ◽  
pp. 22-25
Author(s):  
Shubham Sharma ◽  
Usha Lenka
Keyword(s):  
Design Methodology ◽  
Value Added ◽  
Financial Statements ◽  
Environmental Aspects ◽  
Value Addition ◽  
Content Type ◽  
Economic Context ◽  
Income Statement ◽  
Financial Metrics

Purpose Organizational unlearning is easier said than done. Organizations are usually not cognizant of the ripe time to start questioning and discarding their existing paradigms and past success formulas. This paper aims to recommend the use of a financial metric, i.e. value-added statement, as a trigger to unlearning in organizations. Design/methodology/approach This paper uses a review of existing literature on organizational unlearning to highlight that although prescriptive studies on unlearning are abundant, “how” and “when” organizations should contemplate and discard the obsolete knowledge and routines is still inconspicuous. Findings Value-added statement is an adequate reporting measure that incorporates the contribution of organization toward not only its shareholders but also other stakeholders such as employees, providers of long-term finance, government, and public. It supplements income statement and provides an insight of how organizations are serving its interest groups. A decline in value addition by an organization in a reporting period can serve as a trigger to question the existing practices and break organization’s over-dependence on “one size fits all” approach. Originality/value Unlearning is considered as a means to attain financial performance in an organization. This paper attempts to recommend a financial metric which incorporates the economic, social, and environmental aspects of business, i.e. value-added statement. The rationale for not recommending other financial metrics as a trigger for unlearning is based on grounds of possible manipulation. Moreover, these financial statements are affected by legal, political, and economic context of a nation.

Power distance and landlord-tenant practices across countries

2017 ◽  
Vol 10 (5) ◽  
pp. 628-640
Author(s):  
Hassan Gholipour Fereidouni ◽  
Reza Tajaddini
Keyword(s):  
Cultural Values ◽  
Design Methodology ◽  
Power Distance ◽  
Real Estate Market ◽  
Cultural Dimension ◽  
Content Type ◽  
Explanatory Variables ◽  
Financial Variables ◽  
Alternative Measures ◽  
Market Variables

Purpose This paper aims to investigate whether cultural dimension of power distance, which is the extent that inequality is expected and accepted in societies, can explain underlying differences in landlord-tenant practices (LTP) across countries. Design/methodology/approach The authors use a sample covering countries from different regions. They apply the ordered probit regressions to estimate the relationships between the explanatory variables and LTP. Findings The results show that hierarchical societies demonstrate more pro-landlord practices. This finding is robust to alternative measures of power distance and different sample sizes. In addition, the authors find that countries with larger rental sectors and larger numbers of landlords with mortgages demonstrate more pro-tenant practices. The results also show that differences in LTP across countries are not significantly influenced by legal origin. Originality/value To the best of the authors’ knowledge, very limited studies have investigated the determinants of LTP across countries. In addition, while cultural values such as power distance have been used to explain the economic, social and financial variables, less, if any, number of studies have used them to explain the variation of real estate market variables such as LTP.

Financial distress at Comercial Mexicana, 2008-2011

2015 ◽  
Vol 11 (3) ◽  
pp. 287-305
Author(s):  
Carlos Omar Trejo-Pech ◽  
Susan White ◽  
Magdy Noguera
Keyword(s):  
International Business ◽  
Financial Distress ◽  
Financial Statements ◽  
Asset Sales ◽  
Data Bases ◽  
Content Type ◽  
News Stories ◽  
Basic Understanding ◽  
High Level ◽  
Available Information

Synopsis Controladora Comercial Mexicana, a Mexican retailer, had successfully managed the bankruptcy process and was ready to emerge from its problems, primarily caused by speculation and excessive debt, and begin operations anew. Was the restructured Comerci capable of regaining its position as a premier retailer, and more importantly, was the firm capable of repaying the high level of debt that it carried following bankruptcy reorganization? How strong was the reorganized firm? Had Comerci truly left its problems behind in bankruptcy court, or would history repeat itself? How could Comerci raise funds needed for growth – through additional debt? Though asset sales? Research methodology This case was researched using publicly available information, including the company's financial statements, bankruptcy filings, news stories about the bankruptcy and financial data bases (e.g. ISI Emerging Markets, Economática, Capital IQ, etc.) to obtain information about the competitors and from financial analysts. Relevant courses and levels This case is intended for advanced undergraduate or MBA electives in finance. Students should have a basic understanding of valuation and financing before attempting this case. The case could also be used in a corporate finance or banking class to illustrate bankruptcy and credit risk, or could be used in an international business class to illustrate the differences between USA and international bankruptcies.

Do frequent acquirers outperform in cross-border acquisitions? A study of Indian companies

2020 ◽  
Vol 30 (4) ◽  
pp. 491-514
Author(s):  
Samta Jain ◽  
Smita Kashiramka ◽  
P.K. Jain
Keyword(s):  
Operating Performance ◽  
Financial Statements ◽  
Acquisition Performance ◽  
Content Type ◽  
Acquisition Period ◽  
Cross Border ◽  
Acquiring Firms ◽  
The Impact ◽  
First Time

Purpose The purpose of this paper is to examine the impact of cross-border acquisitions (CBAs) on the financial and operating performance of acquiring firms from emerging economies in the long-term; the acquiring firms have been segregated into frequent (multiple) and first-time (single) acquirers based on their prior cross-border experience. The intent is to identify if overseas activities bring over and above advantage to multiple acquirers in terms of enhanced financial synergies and reduced costs, motivating them to engage in sequential international transactions. Design/methodology/approach The paper analyses the impact of CBAs announced and completed during 2004–2013 by Indian companies listed on the NIFTY 500 index. The post-acquisition financial and operating performance of Indian cross-border acquirers has been compared with their pre-acquisition performance. The average performance over three-years immediately preceding the acquisition year constitutes the benchmark for the post-acquisition performance. The post-acquisition period includes a year of integration followed by three successive post-integration years. Therefore, in operational terms, the research period extends from 2001–2017. The long-term performance of frequent (multiple) and first-time (single) Indian acquirers has been investigated comprehensively using a set of 16 financial ratios. The performance has been assessed using the secondary data collected from financial statements of acquiring companies; the financial statements and the list of CBAs by Indian companies have been obtained from Thomson Reuter’s EIKON database. Findings The financial and operating performance of frequent as well as first-time acquirers have depicted a similarly deteriorating trend during the post-acquisition period. These findings indicate that the international expansion of Indian companies is not guided by synergy creation potential and may be pushed by the overconfidence or over-optimism and agency conflicts of managers. This, perhaps, indicates that firms are being imprudent in investing free cash flows available with them. Originality/value The study is the first of its kind. No study, to the best of the authors’ knowledge, has analysed the performance of acquiring firms by segregating them into frequent and first-time acquirers using accounting measures of performance. More so, an extensive analysis of the long-term financial and operating performance of acquiring companies is rare to come across in the extant literature.

SMEs and their bank choices: trust-related factors or economic calculations?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Krzysztof Jackowicz ◽  
Łukasz Kozłowski ◽  
Adrian Strucinski
Keyword(s):  
Selection Process ◽  
Local Environment ◽  
Financial Statements ◽  
Related Factors ◽  
Content Type ◽  
Factors Affecting ◽  
Level Data ◽  
Practical Implications ◽  
Detailed Picture

PurposeThe authors investigate the factors affecting the decision of small and medium-sized enterprises (SMEs) to do business with either small local banks or large commercial banks.Design/methodology/approachWe combine various data sources on Polish SMEs, including their financial statements, county-level data on SMEs' local environment, information about bank branch locations, as well as a new survey on the specificity of bank–firm relationships. We employ the logit and Tobit models.FindingsSMEs' bank choices and the length of a bank–firm relationship are more strongly associated with trust-related factors, rather than transactional ones. SME managers motivated by trust-related factors are more likely to choose local lenders and maintain long-term relationships with them. However, as firms grow and mature, SME managers lean toward banks adopting transaction-oriented policies.Research limitations/implicationsWe could have drawn a more detailed picture of the bank selection process had we been able to compare the traits of a firm's current and previous banks.Practical implicationsThe study shows that the features of a bank's offer, including product prices, have limited potential in shaping long-term relationships between banks and SMEs.Originality/valueThe topic of bank selection by SMEs has not been thoroughly investigated in the case of Central European countries. We address this gap by comparing two types of potential drivers of bank selection: trust-related factors and a set of purely economic (transactional) motives.

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