New Economics Papers
on Banking
Issue of 2013‒11‒29
25 papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. CEO Compensation and Bank Performance By Athar, Iqbal; Khan, Muhammad Irfan; Ali, Saffar
  2. Does weather affect US bank loan efficiency? By Mamatzakis, E
  3. Procyclicality and Bank Portfolio Risk Level under a Constant Leverage Ratio By Olivier Bruno; Alexandra Girod
  4. Bailouts and Systemic Insurance By Giovanni Dell'Ariccia; Lev Ratnovski
  5. Modeling Banking, Sovereign, and Macro Risk in a CCA Global VAR By Dale F. Gray
  6. The Impact of the Regulation of Centrally Cleared Credit Risk Transfer and Capital Requirements on Banks’ Lending Discipline By Arnold, Marc
  7. Rules of Thumb for Bank Solvency Stress Testing By Daniel C. Hardy; Christian Schmieder
  8. Currency Union with and without Banking Union By Bignon, Vincent; Breton, Régis; Rojas Breu, Mariana
  9. Switching Costs, Deposit Insurance and Deposit Withdrawals from Distressed Banks By Brown, Martin; Guin, Benjamin; Morkoetter, Stefan
  10. Identifying and tracking global, EU and Eurozone systemically important banks with public data By Sergio Masciantonio
  11. Competition in bank-provided payment services By Wilko Bolt; David Humphrey
  12. Bank competition and financial (in)stability in Europe: A sensitivity analysis By Samantas, Ioannis
  13. The Italian financial cycle: 1861-2011 By Riccardo De Bonis; Andrea Silvestrini
  14. Banking Firm and Two-Moment Decision Making By Broll, Udo; Wong, Wing-Keung; Wu, Mojia
  15. Taxation and Corporate Debt: Are Banks any Different? By Jost Heckemeyer; Ruud A. de Mooij
  16. The impact of interbank and public debt markets on the competition for bank deposits By Carlos Pérez Montes
  17. Financial Development and Economic Growth: Evidence from Highly Disaggregated Italian Data By Cristian Barra; Sergio Destefanis; Giuseppe Lubrano Lavadera
  18. Excess Reserves, Monetary Policy and Financial Volatility By Primus, Keyra
  19. Is proprietary trading detrimental to retail investors? By Fecht, Falko; Hackethal, Andreas; Karabulut, Yigitcan
  20. Signaling in Online Credit Markets By Kosuke Uetake; Ken ONISHI; Kei Kawai
  21. Towards Better Use of Credit Reporting in Europe By Pyykko, Elina
  22. Singapore: Financial System Stability Assessment By International Monetary Fund. Monetary and Capital Markets Department
  23. The multiplex structure of interbank networks By Leonardo Bargigli; Giovanni di Iasio; Luigi Infante; Fabrizio Lillo; Federico Pierobon
  24. Shipping Market Financing: Special Features and the Impact of Basel III By Sambracos, Evangelos; Maniati, Marina
  25. Prévision du risque de crédit : Une étude comparative entre l'Analyse Discriminante et l'Approche Neuronale By Younes Boujelbène; Sihem Khemakhem

  1. By: Athar, Iqbal; Khan, Muhammad Irfan; Ali, Saffar
    Abstract: This study sets out to discover the determinants of compensation of the chief executive officers in the banking industry of Pakistan. Accounting based performance measures and size of the firm have been used as predictors. Results of the study are consistent with arguments, suggesting significant and positive impact of size (assets) of the firm on CEO compensation while no association is found with either of the performance measure of the firm except income before tax (IBT). Return on Assets and Return on Equity failed to explain the given phenomenon. The study further elaborates that number of employees (NOEMP) greatly influences on CEO compensation but negatively. This relationship may be due to the unique characteristics of Pakistan's social and economic structure.
    Keywords: Compensation, Corporate Governance, Corporate Control, Return on Assets,Return on Investment
    JEL: G34 G21
    Date: 2012–10–15
  2. By: Mamatzakis, E
    Abstract: The impact of strong emotions or mood on decision making and risk taking is well recognized in behavioral economics and finance. Yet, and in spite of the immense interest, no study, so far, has provided any comprehensive evidence on the impact of weather conditions. This paper provides the theoretical framework to study the impact of weather through its influence on bank manager’s mood on bank inefficiency. In particular, we provide empirical evidence of the dynamic interactions between weather and bank loan inefficiency, using a panel data set that includes 69 banks operating in the US spanning the period 1994 to 2009. Bank loan inefficiency is derived using both a standard stochastic frontier production approach for bank loans and a directional distance function. Then, we employ a Panel-VAR model to derive orthogonalised impulse response functions and variance decompositions, which show responses of the main variables, weather and bank loan inefficiency, to orthogonal shocks. The results provide evidence insinuating the importance of specific weather characteristics, such as temperature and cloud cover time, in explaining the variation of gross loans.
    Keywords: Bank loan inefficiency, weather conditions, panel VAR, causality, US banking.
    JEL: D22 G21 G28
    Date: 2013–11–19
  3. By: Olivier Bruno (GREDEG CNRS; University of Nice Sophia Antipolis, France); Alexandra Girod (GREDEG CNRS)
    Abstract: We investigate the impact the risk sensitive regulatory ratio may have on banks' risk taking behaviours during the business cycle. We show that the risk sensitivity of capital requirements introduce by Basel II adds either an "equity surplus" or an "equity deficit" on a bank that owns a fixed capital endowment and a constant leverage ratio. Depending on the magnitude of cyclical variations into requirements, the "surplus" may be exploited by the bank to increase its value toward the selection of a riskier asset or the "deficit" may restrict the bank to opt for a less risky asset. Whether the optimal asset risk level swings among classes of risk through the cycle, the risk level of bank's portfolio may increase during economic upturns, or decrease in downturns, leading to a rise in financial fragility or a "fly to quality" phenomenon.
    Keywords: Bank capital, Basel capital accord, risk incentive
    JEL: G11 G28
    Date: 2013–10
  4. By: Giovanni Dell'Ariccia; Lev Ratnovski
    Abstract: We revisit the link between bailouts and bank risk taking. The expectation of government support to failing banks creates moral hazard—increases bank risk taking. However, when a bank’s success depends on both its effort and the overall stability of the banking system, a government’s commitment to shield banks from contagion may increase their incentives to invest prudently and so reduce bank risk taking. This systemic insurance effect will be relatively more important when bailout rents are low and the risk of contagion (upon a bank failure) is high. The optimal policy may then be not to try to avoid bailouts, but to make them “effectiveâ€: associated with lower rents.
    Keywords: Banking crisis;Financial intermediation;Moral hazard;Banking systems;Risk management;Economic models;Bailouts, banking crises, moral hazard, systemic risk, contagion, bank resolution
    Date: 2013–11–12
  5. By: Dale F. Gray
    Abstract: The purpose of this paper is to develop a model framework for the analysis of interactions between banking sector risk, sovereign risk, corporate sector risk, real economic activity, and credit growth for 15 European countries and the United States. It is an integrated macroeconomic systemic risk model framework that draws on the advantages of forward-looking contingent claims analysis (CCA) risk indicators for the banking systems in each country, forward-looking CCA risk indicators for sovereigns, and a GVAR model to combine the banking, the sovereign, and the macro sphere. The CCA indicators capture the nonlinearity of changes in bank assets, equity capital, credit spreads, and default probabilities. They capture the expected losses, spreads and default probability for sovereigns. Key to the framework is that sovereign credit spreads, banking system credit risk, corporate sector credit risk, economic growth, and credit variables are combined in a fully endogenous setting. Upon estimation and calibration of the global model, we simulate various negative and positive shock scenarios, particularly to bank and sovereign risk. The goal is to use this framework to analyze the impact and spillover of shocks and to help identify policies that would mitigate banking system, sovereign credit risk and recession risk—policies including bank capital increases, purchase of sovereign debt, and guarantees.
    Keywords: Banking sector;Credit expansion;Sovereign debt;Credit risk;Cross country analysis;Economic models;contingent claims analysis (CCA), global vector autoregression (GVAR).
    Date: 2013–10–23
  6. By: Arnold, Marc
    Abstract: This article analyzes the impact of the regulatory design of centrally cleared credit risk transfer and capital requirements on a loan originating bank's lending discipline in the primary loan market. Under Basel III, a bank can transfer credit risk via central clearing at favorable regulatory conditions. Credit risk transfer, however, reduces the lending discipline because it allows the bank to profitably grant and hedge a low quality loan. Stricter capital requirements only mitigate this problem if they are combined with a credit risk retention rule for the loan originator. It is shown how the retention rule, the disclosure requirements on the centrally cleared credit risk transfer market, and the capital requirements for hedged and unhedged loan exposures jointly affect a bank's lending discipline.
    JEL: G18 G28
    Date: 2013–05
  7. By: Daniel C. Hardy; Christian Schmieder
    Abstract: Rules of thumb can be useful in undertaking quick, robust, and readily interpretable bank stress tests. Such rules of thumb are proposed for the behavior of banks’ capital ratios and key drivers thereof—primarily credit losses, income, credit growth, and risk weights—in advanced and emerging economies, under more or less severe stress conditions. The proposed rules imply disproportionate responses to large shocks, and can be used to quantify the cyclical behaviour of capital ratios under various regulatory approaches.
    Keywords: Banks;Banking crisis;Stress testing;Economic models;Stress testing, rules of thumb, bank stability, bank capitalization
    Date: 2013–11–11
  8. By: Bignon, Vincent; Breton, Régis; Rojas Breu, Mariana
    Abstract: This paper analyzes a two-country model of currency, banks and endogenous default to study whether impediments to credit market integration across jurisdictions impact the desirability of a currency union. We show that when those impediments induce a higher cost for banks to manage cross-border credit compared to domestic credit, welfare may not be maximal under a regime of currency union. But a banking union that would suppress hurdles to banking integration restores the optimality of that currency arrangement. The empirical and policy implications in terms of banking union are discussed.
    Keywords: E42; E50; F3; G21;
    Date: 2013
  9. By: Brown, Martin; Guin, Benjamin; Morkoetter, Stefan
    Abstract: We study deposit withdrawals by retail customers of two large Swiss banks after these banks incurred substantial investment losses in the wake of the U.S. subprime crisis. Our analysis is based on survey data providing information on all bank relations of 1,475 households and documenting their reallocation of deposits in 2008-2009. We find that households are 16 percentage points more likely to withdraw deposits from a distressed bank than from a nondistressed bank. The propensity to withdraw deposits from a distressed bank is substantially reduced by household-level switching costs: Households which rely on a single deposit account, which do not live close to a non-distressed bank, or which maintain a credit relationship with the distressed bank, are significantly less likely to withdraw deposits. By contrast, we find that the withdrawal of deposits from distressed banks is unrelated to household coverage by deposit insurance. Our findings provide empirical support to the Basel III liquidity regulations which emphasize the role of well-established client relationships for the stability of bank funding.
    Keywords: Liquidity Risk, Bank Run, Market Discipline, Deposit Insurance, Switching Costs
    JEL: D14 G21 G28
    Date: 2013–11
  10. By: Sergio Masciantonio (Bank of Italy)
    Abstract: This paper develops a methodology for identifying systemically important financial institutions based on that developed by the Basel Committee on Banking Supervision (2011) and used by the Financial Stability Board in its yearly G-SIBs identification. The methodology uses publicly available data to provide fully transparent results with a G-SIBs list that helps to bridge the gap between market knowledge and supervisory decisions. Moreover, the results include a complete ranking of the banks in the sample, according to their systemic importance scores. The methodology is then applied to EU and Eurozone samples of banks to obtain their systemic importance ranking and SIFI lists. This is one of the first methodologies capable of identifying systemically relevant banks at the European level. A statistical analysis and some geographical and historical evidence provide further insight into the notion of systemic importance, its policy implications and the future applications of this methodology.
    Keywords: banks, balance sheets, systemic risk, SIFIs, financial stability, regulation
    JEL: G01 G10 G18 G20 G21 G28
    Date: 2013–10
  11. By: Wilko Bolt; David Humphrey
    Abstract: Banks supply payment services that underpin the smooth operation of the economy. To ensure an efficient payment system, it is important to maintain competition among payment service providers but data available to gauge the degree of competition are quite limited. We propose and implement a frontierbased method to assess relative competition in bank-provided payment services. Billion dollar banks account for around ninety percent of assets in the US and those with around $4 to $7 billion in assets turn out to be both the most and the least competitive in payment services, not the very largest banks.
    Keywords: Payments; competition; banks; frontier analysis
    JEL: G21 L80 L00
    Date: 2013–11
  12. By: Samantas, Ioannis
    Abstract: This study examines the effect of market structure variables on stability subject to regulation and supervision variables. The Extreme Bound Analysis (EBA) is employed over a sample of banks operating within the enlarged European Union during the period 2002-2010. The results show an inverse U-shaped association between market power and bank soundness and stabilizing tendency in markets of less concentration, where policies lean towards limited restrictions on non-interest bearing activities, official intervention to bank management and book transparency. However, in markets with higher share of foreign owned assets, the pattern is inverted. The significant impact of regulatory variables contributes to the ongoing reform as a stability channel of bank competition.
    Keywords: Market power; financial stability; regulation; extreme bound analysis
    JEL: D24 D4 G21 L11 L51
    Date: 2013–11
  13. By: Riccardo De Bonis (Bank of Italy); Andrea Silvestrini (Bank of Italy)
    Abstract: In this paper we investigate the main features of the Italian financial cycle, extracted by means of a structural trend-cycle decomposition of the credit-to-GDP ratio, using annual observations from 1861 to 2011. In order to draw conclusions based on solid historical data, we provide a thorough reconstruction of the key balance-sheet time series of Italian banks, considering all the main assets and liabilities over the last 150 years. We come to three main conclusions. First, while there was a close correlation between loans and deposits (relative to GDP) until the mid-1970s, over the last 30 years this link has become more tenuous, and the volume of loans has increased in relation to deposits. The banks have covered this “funding gap†mainly by issuing new debt securities. Second, the Italian financial cycle has a much longer duration than traditional business cycles. Third, taking into account the deviation of the credit-to-GDP ratio from its trend, an acceleration of credit preceded a banking crisis in 8 out of the 12 episodes listed by Reinhart and Rogoff (2009). A Logit regression confirms a positive association between the probability of a banking crisis and a previous acceleration of the credit-to-GDP gap. However, there were also periods - such as the early 1970s - in which the growth of the credit-to-GDP ratio was not followed by a banking crisis.
    Keywords: banking system, credit-to-GDP ratio, financial cycle, unobserved components.
    JEL: C22 C82 E32 E44 G01 N10
    Date: 2013–10
  14. By: Broll, Udo; Wong, Wing-Keung; Wu, Mojia
    Abstract: The economic environment for financial institutions has become increasingly risky. Hence these institutions must find ways to manage risk of which one of the most important forms is interest rate risk. In this paper we use the mean-variance (mean-standard deviation) approach to examine a banking firm investing in risky assets and hedging opportunities. The mean-standard deviation framework can be used because our hedging model satisfies a scale and location condition. The focus of this study is on how interest rate risk affects optimal bank investment in the loan and deposit market when derivatives are available. Furthermore we explore the relationship among the first- and second-degree stochastic dominance efficient sets and the mean-variance efficient set.
    Keywords: banking firm, investment, technology, risk, derivatives, hedging,(mu,sigma)-preferences, stochastic dominance.
    JEL: G21 G22
    Date: 2013–12–23
  15. By: Jost Heckemeyer; Ruud A. de Mooij
    Abstract: This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds that there is no significant difference. The marginal tax effect for both banks and non-banks is close to 0.2. However, the responsiveness differs considerably across the size distribution and the conditional leverage distribution. For nonbanks, we find a U-shaped relationship between asset size and tax responsiveness, although this pattern does not hold universally across the conditional leverage distribution. For banks, in contrast, the tax responsiveness declines linearly in asset size. Quantile regressions show further that capitaltight banks are significantly less responsive than are capital-abundant banks; the same pattern holds for the largest non-banks. Still, even the largest banks with high conditional leverage ratios feature a significant, positive tax response.
    Keywords: Taxation;Corporate sector;Debt;Corporate taxes;Banks;Nonbank financial sector;Corporate tax; debt bias; leverage; banks; non-financial firms; quantile regressions
    Date: 2013–10–29
  16. By: Carlos Pérez Montes (Banco de España)
    Abstract: The growth in the interest rates paid on Spanish public debt since 2008 and the impairment of the interbank market have generated concerns about their effects on competition for bank deposits in Spain. I combine a nested logit model of bank deposit supply with a structural model of competition to measure the impact of the reference interest rates on public debt and interbank markets on the returns on deposits and funding policy of Spanish banks in the period 2003-2010. The interbank rate is found to be more closely correlated with the return on deposits than the interest rate on public debt, but the connection between interbank rates and deposit returns is significantly weaker in the crisis period 2008-2010. Counterfactual analysis shows a significant effect of the interbank rate and investment opportunities in public debt on deposit rates and bank profits, and that observed deposit rates are on average 115bp above collusive levels
    Keywords: Bank Competition, Interbank Rates, Public Debt, Nested Logit, Counterfactual Analysis
    JEL: G21 D43 L1
    Date: 2013–11
  17. By: Cristian Barra (Università di Salerno); Sergio Destefanis (Università di Salerno, CELPE and CSEF); Giuseppe Lubrano Lavadera (IRAT, CNR, Naples)
    Abstract: In this paper we test the nexus between financial development and economic growth upon territorially highly disaggregated data from Italy, paying particular attention to the role of market power of local banks and cooperative banks. Profit efficiency, computed using the so-called “true fixed-effects” model proposed by Greene (J PROD ANAL 2005), is used as qualitative measure of financial development, while its quantitative measure is credit volume divided by gross domestic product. A growth model, similar to Hasan et al. (J BANK FINANC 2009), is specified and tested on panel data over the 2001-2010 period. Our estimates suggest that both indicators of financial development have a positive significant impact on GDP per worker, especially when considering cooperative banks and duopolistic markets. None of the above quoted results seems to be much affected by occurrence of the ongoing recession.
    Keywords: Financial development, Economic growth, Profit efficiency, Frontier analysis, Banking efficiency
    JEL: D24 G21 L89
    Date: 2013–11–20
  18. By: Primus, Keyra
    Abstract: This paper examines the financial and real effects of excess reserves in a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model with monopoly banking, credit market imperfections and a cost channel. The model explicitly accounts for the fact that banks hold excess reserves and they incur costs in holding these assets. Simulations of a shock to required reserves show that although raising reserve require- ments is successful in sterilizing excess reserves, it creates a procyclical e¤ect for real economic activity. This result implies that financial stability may come at a cost of macroeconomic stability. The findings also indicate that using an augmented Taylor rule in which the policy interest rate is adjusted in response to changes in excess re- serves reduces volatility in output and inflation but increases fluctuations in financial variables. To the contrary, using a countercyclical reserve requirement rule helps to mitigate fluctuations in excess reserves, but increases volatility in real variables.
    Keywords: Excess Reserves, Reserve Requirements, Countercyclical Rule
    JEL: E4 E5 E52 E58
    Date: 2013–10
  19. By: Fecht, Falko; Hackethal, Andreas; Karabulut, Yigitcan
    Abstract: We study a conflict of interest faced by universal banks that conduct proprietary trading alongside their retail banking services. Our dataset contains the stock holdings of each and every German bank and of their corresponding retail clients. We investigate (i) whether banks deliberately push stocks from their proprietary portfolios into their retail customer portfolios, (ii) whether those stocks subsequently underperform, and (iii) whether retail customers of banks with proprietary trading earn lower long-term portfolio returns than their peers. We present affirmative evidence on all three questions and conclude that proprietary trading can, in fact, be very detrimental to retail investors. --
    Keywords: conflict of interests,universal banks,proprietary trading,retail investment,retail banking
    JEL: G30 G32
    Date: 2013
  20. By: Kosuke Uetake (Northwestern University); Ken ONISHI (Northwestern University); Kei Kawai (New York University)
    Abstract: This paper studies how signaling can facilitate the functioning of a market with classical adverse selection problems. Using data from, an online credit market where loans are funded through auctions, we provide evidence that reserve interest rates that borrowers post can serve as a signaling device. We then develop and estimate a structural model of borrowers and lenders where low reserve interest rates can credibly signal low default risk. Announcing a high reserve interest rate increases the probability of receiving funding at the cost of higher expected interest payments conditional on obtaining a loan. Borrowers regard this trade-off differentially, which results in a separating equilibrium. Using the estimated parameters of the model, we compare the credit supply curve and welfare under three alternative market designs in our counterfactual policy experiment -- a market with signaling, a market without signaling, and a market with no asymmetric information. We find that the cost of adverse selection can be as much as 16% of the total surplus created under no asymmetric information, up to 95% of which can be restored with signaling. We also estimate the credit supply curves for each of the three market designs and find backward-bending supply curves for some of the markets, consistent with the prediction of Stiglitz and Weiss (1981).
    Date: 2013
  21. By: Pyykko, Elina
    Abstract: This report discusses how the current EU credit reporting systems meet the demands of the different stakeholders in the credit granting and management process, and what is needed to improve these systems. As credit reporting is a tool for responsible lending and for ensuring financial inclusion of consumers, it argues that the needs of EU credit markets and consumers should be the basis for assessing the current regulation and its functionality. How a creditor assesses the risk and the creditworthiness of a customer is at the core of successful and safe crediting. Facilitating this assessment process, within the boundaries of data protection laws, is a key building block for making well-informed credit decisions.
    Date: 2013–09
  22. By: International Monetary Fund. Monetary and Capital Markets Department
    Abstract: EXECUTIVE SUMMARY The Singapore financial system is highly developed, and well regulated and supervised. Singapore is one of the world’s largest financial centers, built around a core of domestic and international banks, and also offers a wide range of non-bank services. The authorities have given strong emphasis to integrity and stability in finance and to compliance with international standards, and have addressed most recommendations made by the 2004 FSAP. Singapore’s current regulation and supervision are among the best globally. The Monetary Authority of Singapore (MAS) oversees the entire financial system, and has the analytical and operational capabilities to do so effectively. Singapore is exposed to a broad array of domestic and global risks, especially in light of its interconnectedness with other financial centers. The most pressing vulnerability appears to stem from the rapid growth of credit and real estate prices in recent years, but the financial system is also exposed to possible spillovers from a future tightening of U.S. monetary policy, an economic slowdown in China, or a deterioration of economic conditions in Europe. The team’s stress tests suggest that these risks are manageable. This reflects banks’ large capital and other cushions, and the decisive macroprudential actions taken by MAS to address the threat of a bubble in the housing sector. Moreover, MAS has sought to address potential spillovers from other major financial centers by converting large retail branches operating in the domestic market into domestically incorporated subsidiaries, and by pressing in international fora for greater sharing of supervisory information on global systemically important financial institutions (G-SIFIs). Looking forward, the analysis suggests the importance of continuing to monitor closely cross-border interbank liabilities, and also of continuing to adjust macroprudential measures in response to domestic housing market conditions.
    Keywords: Financial system stability assessment;Financial sector;Banks;Credit risk;Bank supervision;Insurance;Stress testing;Capital markets;Macroprudential Policy;Singapore;
    Date: 2013–11–14
  23. By: Leonardo Bargigli; Giovanni di Iasio; Luigi Infante; Fabrizio Lillo; Federico Pierobon
    Abstract: The interbank market has a natural multiplex network representation. We employ a unique database of supervisory reports of Italian banks to the Banca d'Italia that includes all bilateral exposures broken down by maturity and by the secured and unsecured nature of the contract. We find that layers have different topological properties and persistence over time. The presence of a link in a layer is not a good predictor of the presence of the same link in other layers. Maximum entropy models reveal different unexpected substructures, such as network motifs, in different layers. Using the total interbank network or focusing on a specific layer as representative of the other layers provides a poor representation of interlinkages in the interbank market and could lead to biased estimation of systemic risk.
    Date: 2013–11
  24. By: Sambracos, Evangelos; Maniati, Marina
    Abstract: Shipping sector constitutes a sector with special characteristics that considerably differentiate it from the other sub-sectors of international transport. The maximisation of benefits for each one of the special market characteristics form a highly dynamic environment, with high risk of loss of invested capital. Within this framework, commercial banks, being the main source of financing shipping market, which is characterised by high capital and operating costs, have to take into account various variables in order to minimise the risk and maximise the return. The last is of particular importance considering the recent regulatory framework for banks applied by the Basel III, which has been elaborated on the grounds of inappropriateness of Basel II.
    Keywords: Finance, Shipping Market, Basel, Risks
    JEL: E32 G15 G32 R40
    Date: 2013–10–01
  25. By: Younes Boujelbène (UREA - FSEG Sfax); Sihem Khemakhem (UREA - FSEG Sfax)
    Abstract: Banks are interested in evaluating the risk of the financial distress before giving out a loan. Many researchers proposed the use of models based on the Neural Networks in order to help the banker better make a decision. The objective of this paper is to explore a new practical way based on the Neural Networks that would help improve the capacity of the banker to predict the risk class of the companies asking for a loan. This work is motivated by the insufficiency of traditional prevision models. The sample consists of 86 Tunisian firms and 15 financial ratios are calculated, over the period from 2005 to 2007. The results are compared with those of discriminant analysis. They show that the neural networks technique is the best in term of predictability.
    Date: 2013–11–17

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