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on Corporate Finance |
| By: | Deininger, Klaus; Liu, Yanyan |
| Abstract: | Despite their potential importance and ease of modification, impacts of monitoring and loan recovery arrangements on micro-credit groups'repayment performance have rarely been studied. Data on 3,350 expired group loans in 300 Indian villages highlight that regular monitoring and audits, high repayment frequency, consumption smoothing support through rice credit, and having group savings deposited with the lender all significantly increase repayment rates. Estimated magnitudes of their effects vastly exceed those of members'socio-economic characteristics. Significantly lower repayment on loans originating in externally provided grant resources suggests that stringent monitoring will be essential for these to have a sustainable impact. |
| Keywords: | Access to Finance,Debt Markets,,Bankruptcy and Resolution of Financial Distress,Strategic Debt Management |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4885&r=cfn |
| By: | Francis A. Longstaff; Brett Myers |
| Abstract: | How does the market value complex structured-credit securities? This issue is central to understanding the current financial crisis and identifying effective policy measures. We study this issue from a novel perspective by contrasting the valuation of CDO equity with that of bank stocks. This is possible because both CDO equity and bank stock represent levered first-loss residual claims on an underlying portfolio of debt. There are strong similarities in the two types of equity investments. Using an extensive data set of CDX index tranche prices, we find that the discount rates applied by the market to bank and CDO equity are very comparable. In addition, a single factor explains more than 64 percent of the variation in bank and CDO equity returns. Although banks are presumably active credit-portfolio managers, we find that bank alphas are significantly negative during the sample period and comparable in magnitude to those of more-passively-managed CDO equity. Both banks and CDO equity display significant sensitivity to "shadow banking'' factors such as counterparty credit risk, the availability of collateralized financing for debt securities, and the liquidity of the derivatives market. A key implication is that we may be able to value "toxic'' assets using readily-available stock market information. |
| JEL: | G12 G13 G21 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14871&r=cfn |