|
on Corporate Finance |
| By: | Gunnar Grass |
| Abstract: | I propose a new measure of credit risk, model implied credit spreads (MICS), which can be extracted from any structural credit risk model in which debt values are a function of asset risk and the payout ratio. I implement MICS assuming a barrier option framework nesting the Merton (1974) model of capital structure. MICS are the increase in the payout to creditors necessary to offset the impact of an increase in asset variance on the option value of debt. Endogenizing asset payouts, my measure (i) predicts higher credit risk for safe firms and lower credit risk for firms with high volatility and leverage than a standard distance to default (DD) measure and (ii) clearly outperforms the DD measure when used to predict corporate default or to explain variations in credit spreads. |
| Keywords: | Structural Credit Risk Models, Bankruptcy Prediction, Risk-Neutral Pricing |
| JEL: | G33 G13 G32 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1219&r=cfn |
| By: | Laurent Weill (LaRGE Research Center, Université de Strasbourg); Christophe Godlewski (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | This paper examines the motivations for large firms to choose an Islamic loan over a conventional loan and the recent expansion of Islamic finance activities. We employ a dataset of Islamic and conventional syndicated loans from countries in the Middle East and Southeast Asia for the period 2001-2009, testing determinants for the choice of an Islamic loan at the facility, firm, and country level. From the lenders standpoint, loan characteristics apparently do not influence the decision to offer Islamic loans, nor are they rationed to borrowers in terms of maturity or amount. Moreover, firms taking Islamic loans do not appear to differ in terms of default risk from firms taking conventional loans. We identify three country-level determinants as potential driving forces expanding the preference for Islamic loans. The strongest determinant is religiosity, i.e. the share of Muslim population in a country, but the quality of institutions and level of financial development also play substantial roles. |
| Keywords: | Islamic banks, loans. |
| JEL: | G21 G32 O16 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2012-05&r=cfn |
| By: | Saumitra, Bhaduri; Toto, Goyal |
| Abstract: | This study analyzes the monetary policy transmission in India with the help of bank lending channel hypothesis. We test the shift in loan supply emanating from the changes in the prime policy rate used by the Reserve Bank of India. Using yearly bank balance sheet data from 1996 to 2007, the paper provides evidence of an operational BLC in India. Further, segregating banks by asset size and liquidity, we find that small, illiquid banks are more affected by policy changes, and the effect is more pronounced in areas of non-priority sector lending. Finally, the domestically owned banks are more sensitive to policy rate changes vis-à-vis foreign banks. |
| Keywords: | Bnak lending Channel India |
| JEL: | G38 |
| Date: | 2012–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37997&r=cfn |