Earticle

초록

영어

While there is a very large literature on the determinants of default on various debt instruments, relatively little is known about the factors which influence recoveries on bank loans in the default state. The issue has taken on heightened importance since Basel II permits banks to determine required capital holdings by using model-based estimates of “loss given default” which depends on the recovery rate. We measure recoveries using the “Ultimate Recovery Database” supplied by Moody’s and model the recovery rate as a function of variables reflecting loan and borrower characteristics, industry and macroeconomic conditions, and several recovery process variables. We find that loan characteristics, such as the presence of certain types of collateral, are significant determinants of recovery rates, whereas many of the borrower characteristics before default generally are not. Industry and macroeconomic conditions also are relevant, as are certain process factors such as prepackaged bankruptcies. Since trading prices on loans approximately 30 days after default are often used by practitioners (and in some academic studies) as proxies for the recovery rate, we examine whether this proxy provides a rational estimate of actual recoveries. We find that the process that drives the 30-day trading price after default differs significantly from the actual settlement recovery process.

목차

Abstract
 1. Introduction
 2. Related Literature
 3. The Model
  3.1 Loan characteristics
  3.2 Recovery process characteristics
  3.3 Borrower characteristics
  3.4 Macroeconomic conditions, industry characteristics, and probability of default
 4. Sample data and econometric specification
  4.1 Sample data
  4.2 Econometric specification
 5. Empirical results
  5.1 Univariate analysis results
  5.2 Multivariate regression results
 6. How well does the trading price serve as a proxy for ultimate recoveries?
 7. Robustness checks
 8. Conclusion
 References
 Table

저자

• Hinh Khieu [ University of Southern Indiana ] *Correspondence author
• Donald Mullineaux [ University of Kentucky ]
• Ha-Chin Yi [ Texas State University ]

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간행물

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• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330