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What drives the time to resolution of defaulted bank loans?

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  • Betz, Jennifer
  • Kellner, Ralf
  • Rösch, Daniel

Abstract

Using a unique data base of Global Credit Data with individual loan information from small and medium sized entities in Germany, Great Britain and the United States, we evaluate the time to resolution of defaulted loans. A comparison across countries reveals country specific drivers for the resolution time which can be explained fairly well by differences in the regulatory and legal framework. Lenders seem to be aware of these differences and adjust their lending behavior in the limits set by these bankruptcy systems of the countries.

Suggested Citation

  • Betz, Jennifer & Kellner, Ralf & Rösch, Daniel, 2016. "What drives the time to resolution of defaulted bank loans?," Finance Research Letters, Elsevier, vol. 18(C), pages 7-31.
    • Handle: RePEc:eee:finlet:v:18:y:2016:i:c:p:7-31
    DOI: 10.1016/j.frl.2016.03.013
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    Cited by:

    1. Betz, Jennifer & Kellner, Ralf & Rösch, Daniel, 2018. "Systematic Effects among Loss Given Defaults and their Implications on Downturn Estimation," European Journal of Operational Research, Elsevier, vol. 271(3), pages 1113-1144.
    2. Stef, Nicolae & Ben Jabeur, Sami & Scherer, Robert F., 2022. "Time to resolve insolvency and political elections," International Review of Law and Economics, Elsevier, vol. 72(C).
    3. Krüger, Steffen & Rösch, Daniel, 2017. "Downturn LGD modeling using quantile regression," Journal of Banking & Finance, Elsevier, vol. 79(C), pages 42-56.
    4. González, Marta Ramos & Ureña, Antonio Partal & Fernández-Aguado, Pilar Gómez, 2018. "Proposal on ELBE and LGD in-default: tackling capital requirements after the financial crisis," Working Paper Series 2165, European Central Bank.
    5. Frank Ranganai Matenda & Mabutho Sibanda & Eriyoti Chikodza & Victor Gumbo, 2022. "Corporate Loan Recovery Rates under Downturn Conditions in a Developing Economy: Evidence from Zimbabwe," Risks, MDPI, vol. 10(10), pages 1-24, October.
    6. Jennifer Betz & Ralf Kellner & Daniel Rösch, 2021. "Time matters: How default resolution times impact final loss rates," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 70(3), pages 619-644, June.
    7. Marta Ramos González & Antonio Partal Ureña & Pilar Gómez Fernández-Aguado, 2021. "Regulatory Estimates for Defaulted Exposures: A Case Study of Spanish Mortgages," Mathematics, MDPI, vol. 9(9), pages 1-9, April.

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    More about this item

    Keywords

    credit risk; bankruptcy; resolution of financial distress; time to resolution; resolution bias;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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