Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/177378 
Year of Publication: 
2016
Citation: 
[Journal:] Business Research [ISSN:] 2198-2627 [Volume:] 9 [Issue:] 2 [Publisher:] Springer [Place:] Heidelberg [Year:] 2016 [Pages:] 179-228
Publisher: 
Springer, Heidelberg
Abstract: 
Based on a unique data set of 909 defaulted retail and commercial (self-employed and SMEs) credit customers in Germany, whose original loans were made by 123 different banks, our article confirms a significant positive influence of collateral, and of amicable agreements between the debtor and the bank (redemption), on the recovery rate [1 − loss given default (LGD)]. In a further analysis of collateral, systematic biases between the realized market price and the expected market values of real estate are revealed, even though the appraisal reports should have already considered all factors influencing the value. Using valuations that were adjusted for these recognized biases, we can increase the explanatory power of the underlying models. Moreover, we compare these models to models that apply, as is common practice in the banking industry, flat haircuts to collateral values and show the superior performance of our proposed approach.
Subjects: 
Redemption
Collateral in real estate
Recovery rate
Bank loans
Basel II
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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