Corporate credit risk modeling and the macroeconomy

Document identifier: oai:dalea.du.se:2598
Access full text here:10.1016/j.jbankfin.2006.06.012
Keyword: Social Sciences, Economics and Business, Samhällsvetenskap, Ekonomi och näringsliv, Firm default; default risk; credit risk; corporate loans; duration model; survival; macroeconomy, Kreditriskmodellering
Publication year: 2007
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Abstract:

Despite a surge in the research efforts put into modeling credit and default risk during the past decade, few studies have incorporated the impact that macroeconomic conditions have on business defaults. In this paper, we estimate a duration model to explain the survival time to default for borrowers in the business loan portfolio of a major Swedish bank over the period 1994-2000. The model takes both firm-specific characteristics, such as accounting ratios and payment behaviour, loan-related information, and the prevailing macroeconomic conditions into account. The output gap, the yield curve and consumers' expectations of future economic development have significant explanatory power for the default risk of firms. We also compare our model with a frequently used model of firm default risk that conditions only on firm-specific information. The comparison shows that while the latter model can make a reasonably accurate ranking of firms' according to default risk, our model, by taking macro conditions into account, is also able to account for the absolute level of risk. 

Authors

Kenneth Carling

Högskolan Dalarna; Statistik
Other publications >>

Tor Jacobson

Other publications >>

Jesper Lindé

Other publications >>

Kasper Roszbach

Other publications >>

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    header: 
        identifier: oai:dalea.du.se:2598
        datestamp: 2021-04-15T12:57:22Z
        setSpec: SwePub-du
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                version: 3.7
            recordInfo: 
                recordContentSource: du
                recordCreationDate: 2007-03-30
            identifier: 
                http://urn.kb.se/resolve?urn=urn:nbn:se:du-2598
                10.1016/j.jbankfin.2006.06.012
            titleInfo: 
                @attributes: 
                    lang: eng
                title: Corporate credit risk modeling and the macroeconomy
            abstract: 
Despite a surge in the research efforts put into modeling credit and default risk during the past decade few studies have incorporated the impact that macroeconomic conditions have on business defaults. In this paper we estimate a duration model to explain the survival time to default for borrowers in the business loan portfolio of a major Swedish bank over the period 1994-2000. The model takes both firm-specific characteristics such as accounting ratios and payment behaviour loan-related information and the prevailing macroeconomic conditions into account. The output gap the yield curve and consumers' expectations of future economic development have significant explanatory power for the default risk of firms. We also compare our model with a frequently used model of firm default risk that conditions only on firm-specific information. The comparison shows that while the latter model can make a reasonably accurate ranking of firms' according to default risk our model by taking macro conditions into account is also able to account for the absolute level of risk. 

            subject: 
                    @attributes: 
                        lang: eng
                        authority: uka.se
                    topic: 
                        Social Sciences
                        Economics and Business
                    @attributes: 
                        lang: swe
                        authority: uka.se
                    topic: 
                        Samhällsvetenskap
                        Ekonomi och näringsliv
                    @attributes: 
                        lang: eng
                    topic: firm default; default risk; credit risk; corporate loans; duration model; survival; macroeconomy
                    @attributes: 
                        lang: swe
                        authority: du
                    topic: Kreditriskmodellering
                    genre: Research subject
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                languageTerm: eng
            genre: 
                publication/journal-article
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                Published
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                        Carling
                        Kenneth
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                    affiliation: 
                        Högskolan Dalarna
                        Statistik
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                        kca
                        0000-0003-2317-9157
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                        Jacobson
                        Tor
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                        roleTerm: aut
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                        Lindé
                        Jesper
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                        Roszbach
                        Kasper
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                dateIssued: 2007
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                titleInfo: 
                    title: Journal of Banking & Finance
                identifier: 
                    0378-4266
                    1872-6372
                part: 
                    detail: 
                            @attributes: 
                                type: volume
                            number: 31
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                                type: issue
                            number: 3
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                        start: 845
                        end: 868
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