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Credit risk

About: Credit risk is a research topic. Over the lifetime, 18595 publications have been published within this topic receiving 382866 citations.


Papers
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Journal ArticleDOI
TL;DR: This paper studied the systematic risk of banks before the crisis, using two samples of banks respectively trading Credit Default Swaps (CDS) and issuing Collateralized Loan Obligations (CLOs).
Abstract: A main cause of the crisis of 2007–2009 is the various ways through which banks have transferred credit risk in the financial system. We study the systematic risk of banks before the crisis, using two samples of banks respectively trading Credit Default Swaps (CDS) and issuing Collateralized Loan Obligations (CLOs). After their first usage of either risk transfer method, the share price beta of these banks increases significantly. This suggests the market anticipated the risks arising from these methods, long before the crisis. We additionally separate this beta effect into a volatility and a market correlation component. Quite strikingly, this decomposition shows that the increase in the beta is solely due to an increase in banks’ correlations. Thus, while banks may have shed their individual credit risk, they actually posed greater systemic risk. This creates a challenge for financial regulation, which has typically focused on individual institutions.

134 citations

Journal ArticleDOI
TL;DR: The authors showed that the negative cross-sectional relation between dispersion in analysts' earnings forecasts and future stock returns may be explained by financial distress, as proxied by credit rating downgrades.

134 citations

Journal Article
TL;DR: In this paper, the relationship between credit risk and profitability of some selected banks in Ghana was analyzed using the fixed effects framework, which revealed that credit risk has a positive and significant relationship with bank profitability.
Abstract: This study attempts to reveal the relationship between credit risk and profitability of some selected banks in Ghana. A panel data from six selected commercial banks covering the five-year period (2005-2009) was analyzed within the fixed effects framework. In Ghana, the average lending/interest rate is about 30% - 35% per annum. From the results credit risk (non-performing loan rate, net charge-off rate, and the pre-provision profit as a percentage of net total loans and advances) has a positive and significant relationship with bank profitability. This indicates that banks in Ghana enjoy high profitability in spite of high credit risk, contrary to the normal view held in previous studies that credit risk indicators are negatively related to profitability. Our results can be attributed to the prohibitive lending/interest rates, fees and commission (non- interest income) charged. Also, we found support for previous empirical works which depicted that bank size, bank growth and bank debt capital influence bank profitability positively and significantly. Keywords : Credit Risk, Profitability, Banks, Ghana.

134 citations

Book ChapterDOI
01 Jan 1998
TL;DR: In this paper, a scoring system (EMS model) for emerging markets corporate bonds is presented, which is an enhanced version of the statistically proven Z-score model (Altman, 1968) designed for US companies.
Abstract: In this article we discuss a scoring system (EMS model) for emerging markets corporate bonds. The scoring system provides an empirically based tool for the investor to use in making relative value determinations. The EMS model is an enhanced version of the statistically proven Z-score model (Altman, 1968) designed for US companies. Unlike the original Z-score model, our approach can be applied to non-manufacturing companies and manufacturers, and is relevant for privately held and publicly owned firms. The adjusted EMS model incorporates the particular credit characteristics of emerging markets companies, and is best suited for assessing relative value among emerging markets credits. The EMS model combines fundamental credit analysis and rigorous benchmarks together with analyst-enhanced assessments to reach a modified rating, which can then be compared with agency ratings (if any) and market levels. We have included a summary of Mexican companies for which we have applied the EMS model.

133 citations

Posted Content
TL;DR: In this article, the authors focus on the analysis of the recovery rate of bank loans and the impact of the quota of collateral, the creditworthiness of the borrower, the size of the company and the intensity of the client relationship.
Abstract: There are very few studies concerning the recovery rate of bank loans. Prediction models of recovery rates are increasing in importance because of the Basel II-framework, the impact on credit risk management, and the calculation of loan rates. In this study, we focus the analyses on the distribution of recovery rates and the impact of the quota of collateral, the creditworthiness of the borrower, the size of the company and the intensity of the client relationship on the recovery rate. According to our hypotheses a higher quota of collateral leads to a higher recovery rate, whereas the creditworthiness of the borrower and the size of the company is negatively related to the recovery rate. Borrowers with an intense client relationship with the bank exhibit a higher recovery rate.

133 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
20251
2023343
2022729
2021799
2020915
2019921