Credit risk

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

The effect of credit risk management on financial performance of the Jordanian commercial banks

Abstract: This research aims at examining the effect of credit risk management on financial performance of the Jordanian commercial banks during the period (2005-2013), thirteen commercial banks have been chosen to express on the whole Jordanian commercial banks. Two mathematical models have been designed to measure this relationship, the research revealed that the credit risk management effects on financial performance of the Jordanian commercial banks as measured by ROA and ROE. The research further concludes that the credit risk management indicators considered in this research have a significant effect on financial performance of the Jordanian commercial banks. Based on findings, the researcher recommends banks to improve their credit risk management to achieve more profits, in that banks should take into consideration, the indicators of Non-performing loans/Gross loans, Provision for facilities loss/Net facilities and the leverage ratio that were found significant in determining credit risk management. Also, banks should establish adequate credit risk management policies by imposing strict credit estimation before granting loans to customers, and banks in designing an effective credit risk management system, need to establish a suitable credit risk environment; operating under a sound credit granting process, maintaining an appropriate credit administration that involves monitoring, processing as well as enough controls over credit risk, and banks need to put and devise strategies that will not only limit the banks exposition to credit risk but will develop performance and competitiveness of the banks.

Do Credit Rating Agencies Add to the Dynamics of Emerging Market Crises

Abstract: The experience in the period during and after the Asian crisis of 1997-98 has provoked an extensive debate about the credit rating agencies' evaluation of sovereign risk in emerging markets lending. This study analyzes the role of credit rating agencies in international financial markets, particularly whether sovereign credit ratings have an impact on the financial stability in emerging market economies. The event study and panel regression results indicate that credit rating agencies have substantial influence on the size and volatility of emerging markets lending. The empirical results are significantly stronger in the case of government's downgrades and negative imminent sovereign credit rating actions such as credit watches and rating outlooks than positive adjustments by the credit rating agencies while by the market participants' anticipated sovereign credit rating changes have a smaller impact on financial markets in emerging economies.

Recovery rates of commercial lending: Empirical evidence for German companies

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. All our hypotheses can be confirmed. A higher quota of collateral leads to a higher recovery rate, whereas the risk premium 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.