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We review the recent academic and policy literature on bank loan loss provisioning (LLP) to identify several advances in the literature, to highlight some challenges in LLP research and suggest possible directions for future research with some concluding remarks. Among other things, we observe...
Persistent link: https://www.econbiz.de/10012964664
This paper analyses the effects associated with using the magnitude of realised loan losses as a basis for performance measurement and compensation to credit risk team in banks. Paying and rewarding credit risk professionals on the basis of reporting fewer provisions or lower loan losses...
Persistent link: https://www.econbiz.de/10012902590
We investigate the equilibrium interest rate charges on non-recourse and recourse loans secured by stock. In such loans, the client retains the option to prepay and recover the collateral stock. We adopt a structural model of the firm where debt levels, with endogenous bankruptcy, affect equity...
Persistent link: https://www.econbiz.de/10013292845
This paper shows that the effect of inflation on asset prices and real aggregates depends on the financial intermediation sector. When firms finance using nominal long-term debt issued by financial intermediaries, unexpected changes in inflation lead to a wealth transfer across sectors. Higher...
Persistent link: https://www.econbiz.de/10012595351
This research aims to model the relationship between the credit risk signals in the credit default swap (CDS) market and agency credit ratings, and determines the factors that help explain the variation in such signals. A comprehensive analysis of the differences in the relative credit risk...
Persistent link: https://www.econbiz.de/10014095955
Persistent link: https://www.econbiz.de/10012650160
This paper is the first investigation of the interplay between dividends and risk taking in banks. I examine the role of dividends as a risk-shifting mechanism that can exacerbate moral hazard, controlling for standard determinants of dividends in nonfinancial firms. My main findings show that...
Persistent link: https://www.econbiz.de/10013136802
The relation between dividends and bank soundness has recently drawn much attention from both academics and policy makers. However, the existing literature lacks an investigation of the relation between dividends and bank risk taking. I find a positive relation between default risk and payout...
Persistent link: https://www.econbiz.de/10013112888
This paper provides evidence of ratings shopping in the corporate bond market. By estimating systematic differences in agencies' biases about any given firm's bonds, I show that new bonds are more likely to be rated by agencies that are positively biased towards the firm---a pattern that is...
Persistent link: https://www.econbiz.de/10012905996
Using hand-collected data on Israeli firms' unrealized earnings and debt restructurings following adoption of the International Financial Reporting Standards (IFRS), we investigate whether and how dividend payouts based on unrealized revaluation earnings affect a firm's default risk. Our results...
Persistent link: https://www.econbiz.de/10012933216