Advanced Search
MyIDEAS: Login to save this article or follow this journal

Do Economic Downturns Have an Impact on the Loss Given Default of Mobile Lease Contracts? – An Empirical Study for the German Leasing Market –

Contents:

Author Info

  • Thomas Hartmann-Wendels

    (Universität zu Köln, Forschungsinstitut für Leasing, Albertus-Magnus-Platz, D-50923 Köln)

  • Martin Honal

    (Universität zu Köln, Forschungsinstitut für Leasing, Albertus-Magnus-Platz, D-50923 Köln)

Registered author(s):

    Abstract

    Along with the probability of default, the loss given default (LGD) is a crucial variable for the quantification of credit risks. According to the German insolvency law, lessors are allowed to access the leased asset quickly and dispose of it autonomously if the lessee encounters a default. In order to benefit from this advantage over creditors of collateralized bank loans, a reliable estimation of the LGD is of special importance for leasing companies. Using an extensive and unique data set from two major German leasing companies, we analyse the LGD of mobile lease contracts. The contribution of our paper is threefold: First, we extend the empirical evidence about the level and distribution of the LGD according to different asset types. Second, we investigate the impact of macroeconomic conditions on the aggregated LGD and propose a method how leasing companies can determine a downturn LGD for their internal risk control. Third, we address the phenomenon that contracts can “‘resurrect’” from default after some time of financial distress, which has been neglected in academic research so far. Our results suggest that the level of the LGD varies considerably depending on the asset type and that the empirical LGD distribution can be characterized by a bimodal shape. Concerning the impact of the macro-economy on the LGD, we could identify a significant relatíonship for vehicle leases only. Regarding the resurrection rate, we found empirical evidence for a cyclical variability in all asset categories. On the whole, the findings of our study provide useful insights for the internal credit risk management of leasing companies.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Article provided by Credit and Capital Markets in its journal Kredit und Kapital.

    Volume (Year): 43 (2010)
    Issue (Month): 1 ()
    Pages: 65–96

    as in new window
    Handle: RePEc:kuk:journl:v:43:y:2010:i:1:p:65-96

    Contact details of provider:
    Web page: http://www.credit-and-capital-markets.de/

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:kuk:journl:v:43:y:2010:i:1:p:65-96. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Credit and Capital Markets).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.