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An integrated credit rating and loan quality model: application to bank shipping finance

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  • Dimitris Gavalas
  • Theodore Syriopoulos

Abstract

Assessing a borrower's credit quality is a critical input for efficient bank loan facility allocation, particularly at phases of financial distress. An integrated credit rating model is proposed to borrowers' credit rating in support of bank financing decisions. Based on a global bank survey, a core set of critical quantitative and qualitative criteria are initially identified and are subsequently weighted and rated, incorporating a dynamic multicriteria optimization approach. The issue of credit rating migration, inducing adjustments in bank financing decisions, is also investigated. The empirical findings can be instrumental to bank credit policy decisions and risk management.

Suggested Citation

  • Dimitris Gavalas & Theodore Syriopoulos, 2015. "An integrated credit rating and loan quality model: application to bank shipping finance," Maritime Policy & Management, Taylor & Francis Journals, vol. 42(6), pages 533-554, August.
    • Handle: RePEc:taf:marpmg:v:42:y:2015:i:6:p:533-554
    DOI: 10.1080/03088839.2014.904948
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    References listed on IDEAS

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    1. Loretta J. Mester & Leonard I. Nakamura & Micheline Renault, 1998. "Checking accounts and bank monitoring," Working Papers 98-25, Federal Reserve Bank of Philadelphia.
    2. Philip Lowe & Miguel Angel Segoviano, 2002. "Internal ratings, the business cycle, and capital requirements: some evidence from an emerging market economy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
    3. Philip Lowe & Miguel A. Segoviano, 2002. "Internal ratings, the business cycle and capital requirements: some evidence from an emerging market economy," BIS Working Papers 117, Bank for International Settlements.
    4. Frank Dierick & Fatima Pires & Martin Scheicher & Kai Gereon Spitzer, 2005. "The New Basel Capital Framework and its implementation in the European Union," Occasional Paper Series 42, European Central Bank.
    5. Segoviano, Miguel A. & Lowe, Philip, 2002. "Internal ratings, the business cycle and capital requirements: some evidence from an emerging market economy," LSE Research Online Documents on Economics 24948, London School of Economics and Political Science, LSE Library.
    6. Dierick, Frank & Pires, Fatima & Scheicher, Martin & Spitzer, Kai Gereon, 2005. "The New Basel Capital Framework and its implementation in the European Union," Occasional Paper Series 42, European Central Bank.
    7. Philip Lowe, 2002. "Internal ratings, the business cycle and capital requirements: some evidence from an emerging market economy," FMG Discussion Papers dp428, Financial Markets Group.
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    Cited by:

    1. Chrysovalantis Gaganis & Panagiota Papadimitri & Menelaos Tasiou, 2021. "A multicriteria decision support tool for modelling bank credit ratings," Annals of Operations Research, Springer, vol. 306(1), pages 27-56, November.
    2. Jane Haider & Zhirong Ou & Stephen Pettit, 2019. "Predicting corporate failure for listed shipping companies," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 21(3), pages 415-438, September.
    3. Balios, Dimitris & Thomadakis, Stavros & Tsipouri, Lena, 2016. "Credit rating model development: An ordered analysis based on accounting data," Research in International Business and Finance, Elsevier, vol. 38(C), pages 122-136.

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