scholarly journals COVID-19 pandemic risk and probability of loan default: evidence from marketplace lending market

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Asror Nigmonov ◽  
Syed Shams
Keyword(s):  
Financial Markets ◽  
Financial Distress ◽  
Default Risk ◽  
Sample Selection ◽  
Probability Of Default ◽  
Loan Default ◽  
Economic Distress ◽  
Logit Regression ◽  
Low Levels ◽  
The Impact

AbstractAs the COVID-19 pandemic adversely affects the financial markets, a better understanding of the lending dynamics of a successful marketplace is necessary under the conditions of financial distress. Using the loan book database of Mintos (Latvia) and employing logit regression method, we provide evidence of the pandemic-induced exposure to default risk in the marketplace lending market. Our analysis indicates that the probability of default increases from 0.056 in the pre-pandemic period to 0.079 in the post-pandemic period. COVID-19 pandemic has a significant impact on default risk during May and June of 2020. We also find that the magnitude of the impact of COVID-19 risk is higher for borrowers with lower credit ratings and in countries with low levels of FinTech adoption. Our main findings are robust to sample selection bias allowing for a better understanding of and quantifying risks related to FinTech loans during the pandemic and periods of overall economic distress.

scholarly journals The Impact of Default Dependency and Collateralization on Asset Pricing and Credit Risk Modeling

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Asset Pricing ◽  
Credit Risk ◽  
Financial Markets ◽  
Default Risk ◽  
Risk Modeling ◽  
Financial Instruments ◽  
Otc Derivatives ◽  
Counterparty Credit Risk ◽  
Comprehensive Framework ◽  
The Impact

This article presents a comprehensive framework for valuing financial instruments subject to credit risk. In particular, we focus on the impact of default dependence on asset pricing, as correlated default risk is one of the most pervasive threats in financial markets. We analyze how swap rates are affected by bilateral counterparty credit risk, and how CDS spreads depend on the trilateral credit risk of the buyer, seller, and reference entity in a contract. Moreover, we study the effect of collateralization on valuation, since the majority of OTC derivatives are collateralized. The model shows that a fully collateralized swap is risk-free, whereas a fully collateralized CDS is not equivalent to a risk-free one.

scholarly journals KEMUNGKINAN PEMILIHAN METODE NILAI WAJAR BAGI PERUSAHAAN YANG MELAPORKAN PROPERTI INVESTASI

2020 ◽  
Vol 1 (1) ◽  
pp. 21-35
Author(s):  
Sri Putri Siska Mulyanti ◽  
Yeasy Damayanti ◽  
Yunilma
Keyword(s):  
Information Asymmetry ◽  
Stock Exchange ◽  
Sample Selection ◽  
Secondary Data ◽  
Fair Value ◽  
Selection Method ◽  
Publicly Traded ◽  
Logit Regression ◽  
Low Levels ◽  
Selection Of

This study aims to examine the factors that affect the likelihood companies choose the method of fair value for investment properties. Factors in this research consisted of debt levels, the size of the company, information asymmetry and companies in the property industry (control variables).  The population of this research is company publicly traded listed on the Indonesian Stock Exchange 2010-2015 period. The sample selection using purposive sampling, the type of data used is secondary data obtained from the official website of the Stock Exchange. The hypothesis tested using a binomial logit regression models. The results of this study indicate that the level of debt significantly influence the possibility of the selection method for the fair value of investment property. This suggests that the high or low levels of debt may affect the selection of the fair value method. The size of the company, information asymmetry and companies in the property industry did not significantly affect the possibility of the selection method for the fair value of investment property. This suggests that the high or low of company size, and information asymmetry in the property industry has no impact on the possibility of the selection method for the fair value of investment property

International Effect on Family SME Financial Distress Prediction

2022 ◽  
pp. 197-214
Author(s):  
Ines Lisboa ◽  
Magali Costa
Keyword(s):  
Financial Distress ◽  
Default Risk ◽  
Small And Medium Enterprises ◽  
Lower Probability ◽  
Probability Of Default ◽  
Export Ratio ◽  
Financial Distress Prediction ◽  
Proposed Model ◽  
Family Smes ◽  
Medium Enterprises

Understanding the reasons of default risk is crucial to avoid the firm's bankruptcy. The purpose of this work is to analyze the impact of internationalization on firm's probability of distress. For it, this chapter aims to propose a model to predict default specific to family SMEs (small and medium enterprises). An unbalanced panel of 10,832 firms over the period from 2012-2018 is analyzed. Ex-ante criteria to classify firms in default or compliant is used. International SMEs have lower probability of default than domestic firms, and compliant firms export more. Results show that export ratio is an important determinant of the probability of default. Moreover, the ratios of liquidity, profitability, size, leverage, efficiency, cash flow, and age are also relevant. Moreover, these ratios explain default risk of both groups international and domestic SMEs. The proposed model has an accuracy of 92.9%, which increases to 95.6% if only export SMEs are analyzed.

scholarly journals Analysis on financing structure and default probability of listed companies

2021 ◽  
Vol 292 ◽  
pp. 02032
Author(s):  
Xiangyun Luo ◽  
Miao Luo
Keyword(s):  
Cash Flow ◽  
Default Risk ◽  
Listed Companies ◽  
Mediating Effect ◽  
Default Probability ◽  
Probability Of Default ◽  
Financing Structure ◽  
Debt Default ◽  
Cash Flow Risk ◽  
The Impact

This paper studies the relationship between the financing structure and the probability of default of A-share listed companies from 2001 to 2020. The purpose is to prevent the occurrence of default and ensure the healthy development of various industries. It is found that the higher the proportion of external financing is, the higher the probability of default is. The impact of debt financing on default risk is higher than equity financing. In addition, this paper tests the mediating effect of cash flow risk, and the effect of financing structure on debt default probability is heterogeneous among regions and enterprises. These findings show that enterprises must control their financing structure, optimize the allocation of resources, prevent cash flow risk, reduce the probability of debt default, so as to make various industries flourish and optimize the industrial structure.

Analysis of default behavior of borrowers under Islamic versus conventional banking

2016 ◽  
Vol 8 (2) ◽  
pp. 156-173 ◽  
Author(s):  
Genanew Bekele ◽  
Reza H. Chowdhury ◽  
Ananth Rao
Keyword(s):  
United Arab Emirates ◽  
Default Risk ◽  
Explanatory Power ◽  
Capital Requirements ◽  
Islamic Banking ◽  
Specific Information ◽  
Probability Of Default ◽  
Loan Default ◽  
Content Type ◽  
Bank Branches

Purpose The purpose of this paper is to consider borrower-specific characteristics to understand the factors affecting both the probability and quantum of loan default by individual borrowers under Islamic and conventional banking. Design/methodology/approach Borrower-specific characteristics that explain the probability of default may not necessarily be similar factors that determine the quantum of default. The authors therefore apply a Box-Cox double hurdle model to treat both the probability and quantum of default in a two-step approach. The authors also explain the differences in default risk and quantum of default between Islamic and conventional banking borrowers from their behavioral perspectives following the Sharia principles in financial transactions between lenders and borrowers. The authors use borrower-specific information of two separate bank branches of the United Arab Emirates that solely deal with either Islamic or conventional banking products. Findings The paper demonstrates that the probability of default and the quantum of default appear to be influenced by different set of client-specific factors. The results suggest that the probability of default does not vary significantly between Islamic and conventional banking borrowers. The evidence also shows that Islamic banking defaulters, compared to those in conventional banking, repay a large quantum of overdue when their financial leverage improves. However, they do not tend to reduce their outstanding quantum of overdue faster than conventional banking defaulters. Research limitations/implications Availability of data from only two bank branches may limit the explanatory power of empirical findings. Practical implications The study findings will enable the Islamic and conventional banks to appropriately address Basel Capital requirements based on the borrowers’ behavior. Social implications The study findings have the potential for Islamic and conventional financing institutions to be more flexible with equity in their lending practices. Originality/value Religious beliefs are crucial in borrower’s default behavior in Islamic banking.

scholarly journals The Impact of Default Dependency and Collateralization on Asset Pricing and Credit Risk Modeling

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Asset Pricing ◽  
Credit Risk ◽  
Financial Markets ◽  
Default Risk ◽  
Risk Modeling ◽  
Financial Instruments ◽  
Otc Derivatives ◽  
Counterparty Credit Risk ◽  
Comprehensive Framework ◽  
The Impact

This article presents a comprehensive framework for valuing financial instruments subject to credit risk. In particular, we focus on the impact of default dependence on asset pricing, as correlated default risk is one of the most pervasive threats in financial markets. We analyze how swap rates are affected by bilateral counterparty credit risk, and how CDS spreads depend on the trilateral credit risk of the buyer, seller, and reference entity in a contract. Moreover, we study the effect of collateralization on valuation, since the majority of OTC derivatives are collateralized. The model shows that a fully collateralized swap is risk-free, whereas a fully collateralized CDS is not equivalent to a risk-free one.

scholarly journals Does Collateral Affect the Access and Loan Payment Behavior of MSMEs?

2020 ◽  
Vol 23 (2) ◽  
Author(s):  
Lanang Tanu Prihantoro ◽  
Chaikal Nuryakin
Keyword(s):  
Service Rate ◽  
Fund Management ◽  
Loan Default ◽  
Logit Regression ◽  
A Value ◽  
Default Rates ◽  
Service Rates ◽  
The Government ◽  
Logit Regression Model ◽  
The Impact

Various problems regarding the distribution of revolving funds at the Ministry of Cooperatives and SMEs have prompted the government to transfer its management through LPDB-KUMKM (Revolving Fund Management Institution for Cooperatives and MSMEs) for the sake of financial accountability and professionalism. Several improvements have been made, among others, through collateral and service rates that have never been applied before. The service rate was applied first, with a value lower than the bank interest rate. This study examines the impact of collateral and service rates on the loan default rates. This study uses data of loan developments of LPDB-KUMKM partners from the beginning to 2018. The Logit Regression Model is used to support the analysis. This study's results indicate that collateral has a negative correlation with the growth in loan default rates. This study's results are expected to be taken into consideration by the government in regulating financing needs, especially regarding collateral and service rates, so that the accessibility of MSMEs to obtain financing from LPDB-KUMKM will increase.

scholarly journals Ownership structure and performance: evidence from Portugal

2010 ◽  
Vol 7 (3) ◽  
pp. 25-32
Author(s):  
Inês Lisboa ◽  
José Paulo Esperança
Keyword(s):  
Financial Markets ◽  
Ownership Structure ◽  
Small Dimension ◽  
Free Rider ◽  
Ownership Concentration ◽  
Free Rider Problem ◽  
Low Levels ◽  
And Performance ◽  
The Impact ◽  
New Evidence

This paper provides new evidence on the impact of ownership over performance in small dimension markets. Analyzing the Portuguese firms we confirm the monitoring effect. Unlike previous studies, we also confirm the expropriation effect to low levels of ownership concentration. These results suggest that the free rider problem between the manager and the principal is significant in countries with small financial markets

International Effect on Family SME Financial Distress Prediction

2021 ◽  
pp. 175-192
Author(s):  
Ines Lisboa ◽  
Magali Costa
Keyword(s):  
Financial Distress ◽  
Default Risk ◽  
Small And Medium Enterprises ◽  
Lower Probability ◽  
Probability Of Default ◽  
Export Ratio ◽  
Financial Distress Prediction ◽  
Proposed Model ◽  
Family Smes ◽  
Medium Enterprises

Understanding the reasons of default risk is crucial to avoid the firm's bankruptcy. The purpose of this work is to analyze the impact of internationalization on firm's probability of distress. For it, this chapter aims to propose a model to predict default specific to family SMEs (small and medium enterprises). An unbalanced panel of 10,832 firms over the period from 2012-2018 is analyzed. Ex-ante criteria to classify firms in default or compliant is used. International SMEs have lower probability of default than domestic firms, and compliant firms export more. Results show that export ratio is an important determinant of the probability of default. Moreover, the ratios of liquidity, profitability, size, leverage, efficiency, cash flow, and age are also relevant. Moreover, these ratios explain default risk of both groups international and domestic SMEs. The proposed model has an accuracy of 92.9%, which increases to 95.6% if only export SMEs are analyzed.

An Empirical Analysis of Default Prediction Models: Evidence from lndian Listed Companies

2015 ◽  
Vol 8 (3) ◽  
pp. 1-23
Author(s):  
Vandana Gupta
Keyword(s):  
Financial Distress ◽  
Default Risk ◽  
Prediction Models ◽  
Empirical Work ◽  
Predictive Ability ◽  
Financial Statements ◽  
Distress Risk ◽  
Kmv Model ◽  
Default Prediction ◽  
The Impact

This paper attempts to evaluate the predictive ability of three default prediction models: the market-based KMV model, the Z-score model using discriminant analysis (DA), and the logit model; and identifies the key default drivers. The research extends prior empirical work by modeling and testing the impact of financial ratios, macro-economic factors, corporate governance and firm-specific variables in predicting default. For the market-based model, the author has extended the works of KMV in developing a suitable algorithm for determining probability of default (PD). While for the KMV model, the continuous observations of PD are used as the dependent variable, for the accounting-based models, ratings assigned are the proxy for default (those rated ’D’ are defaulted and rated ‘AAA’ and ‘A’ are solvent). The research findings largely support the hypothesis that solvency, profitability and liquidity ratios do impact the default risk, but adding other covariates improves the predictive ability of the models. Through this study, the author recommends that accounting –based models and market based models are conceptually different. While market-based models are forward looking and inclusion of market data makes the default risk quantifiable; to make the PD more exhaustive, it is important to factor in the information provided in the financial statements. The conclusions drawn are that the disclosures in financial statements can help predict default risk as financial distress risk is likely to evolve over time and will be reflected in financial statements beyond accounting ratios. Moreover this will also help divulge “creative accounting” practices by corporates.

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