We propose a comprehensive approach for the analysis of real economy and government sector risk transmission to the banking system and apply it in ten Euro-Area countries from 2005 to 2017. A flexible methodology is developed to model banks' assets according to the risk-adjusted balance sheet of...

In this paper we apply the Contingent Claims Analysis (CCA) to the banking sector in Greece with a particular focus on the years of the Greek debt crisis. Greece was selected primarily because its banking sector was hit hard due to the country's government debt default and its large exposure to...

The aim of this article is to present financial liquidity as a factor affecting the economic condition of the companies on the capital market in relation to the amended Bankruptcy Law in Poland. A study was carried out to determine the impact of liquidity on the increase in earnings per share...

Banks hold liquid and illiquid assets. An illiquid bank that receives a liquidity shock sells assets to liquid banks in exchange for cash. We characterize the constrained efficient allocation as the solution to a planner's problem and show that the market equilibrium is constrained inefficient,...

A major difficulty in determining the appropriate risk premium for lending to small businesses is the lack of market value information. This paper develops a mean-variance model that uses available failure rate data to establish a benchmark risk premium for lending to firms in specific...

In previous works, the importance of risk management implementation was addressed with regard to the problem of bankruptcy threat, with the explanation of risk impact on higher bankruptcy costs or the underinvestment problem. However, the evaluation of the impact of risk outcomes is technically...

This paper presents analysis of profitability indicators of Polish construction companies threatened with bankruptcy compared to analogous indicators obtained by Polish construction entities as a whole. The analysis concerns companies generating positive and negative financial results (both EBIT...

Default probability is a fundamental variable determining the credit worthiness of a firm and equity volatility estimation plays a key role in its evaluation. Assuming a structural credit risk modeling approach, we study the impact of choosing different non parametric equity volatility...

Empirical evidence suggests that capital structure varies across firms facing different levels of information asymmetry, however, this evidence contradict the prediction of pecking order hypothesis. Although debt capacity constraints offer some explanation for this discrepancy, it fails to...