The determinants of bank loan recovery rates

Hinh D. Khieu, Donald J. Mullineaux and Ha-Chin Yi

Journal of Banking & Finance, 2012, vol. 36, issue 4, 923-933

Abstract: Using Moody’s Ultimate Recovery Database, we estimate a model for bank loan recoveries using variables reflecting loan and borrower characteristics, industry and macroeconomic conditions, and several recovery process variables. We find that loan characteristics are more significant determinants of recovery rates than are borrower characteristics prior to default. Industry and macroeconomic conditions are relevant, as are prepackaged bankruptcy arrangements. We examine whether a commonly used proxy for recovery rates, the 30-day post-default trading price of the loan, represents an efficient estimate of actual recoveries and find that such a proxy is biased and inefficient.

Keywords: Recovery rates; Ultimate recoveries; Loss given default; Credit risk (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:4:p:923-933

DOI: 10.1016/j.jbankfin.2011.10.005

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