Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49038
Authors: 
Jouault, Amelie
Featherstone, Allen M.
Year of Publication: 
2011
Citation: 
[Journal:] Journal of Applied Finance & Banking [ISSN:] 1792-6599 [Volume:] 1 [Year:] 2011 [Issue:] 1 [Pages:] 1-30
Abstract: 
Recently, financial institutions have developed improved internal risk rating systems and emphasized the probability of default and loss given default. The default characteristics are studied for 756 loans from a French bank: CIC- Banque SNVB. A binomial logit regression is used to estimate several models of the probability of default of agribusiness loans based on information available at loan origination. The results show that leverage, profitability and liquidity at loan origination are statistically significant indicators of the probability of default. As leverage increases, profitability decreases, or liquidity decreases, the probability of default increases. As the length of loan increases, the probability of default also increases. Finally, it is more accurate to develop a model for each type of collateral (activity). By developing more quantitative credit scoring models, banks may benefit from lower capital requirements while borrowers may see better rates where the risk of loans is appropriately priced.
Subjects: 
agricultural credit risk
probability of default
agribusiness loan, French banking
JEL: 
Q14
Document Type: 
Article

Files in This Item:
File
Size
233.61 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.