Search results

1 – 10 of over 37000
To view the access options for this content please click here
Article
Publication date: 26 October 2012

Jiajia Jin, Ziwen Yu and Chuanmin Mi

This paper attempts to analysis the credit risk at the angle of industrial and macroeconomic factor using grey incidence analysis method.

Downloads
2583

Abstract

Purpose

This paper attempts to analysis the credit risk at the angle of industrial and macroeconomic factor using grey incidence analysis method.

Design/methodology/approach

Credit asset quality problem is one of the obstacles limiting the further development of commercial banks; the research on credit risk becomes an important part of the implementation of a commercial bank's risk management. Different industries may have different effects on the credit risk of commercial bank. This paper proposes finding out the different incidences between industries and credit risk, as well as macroeconomics. Incidence identification method is established to investigate whether the industry and macroeconomic factor could affect an impaired loan ratio of a bank using the grey incidence analysis method.

Findings

The results indicate that the impaired loan ratio differs with diverse industry's influence and the macroeconomics also affect it. From the angle of the industry, the result can also determine the risk deviation scope in the grey risk control process which offers new content and ideas within the grey risk control.

Practical implications

Under the guidance of the principle of “differential treatment, differential control”, this research will help to strengthen the implementation of differentiated credit policy, focus on guiding and promoting the optimization of credit structure, so as to maintain a reasonable size of credit facilities and build a steady currency credit system.

Originality/value

The paper succeeds in finding the top five influent industries compared with others by using one of the newest developed theories: grey systems theory.

Details

Grey Systems: Theory and Application, vol. 2 no. 3
Type: Research Article
ISSN: 2043-9377

Keywords

To view the access options for this content please click here
Article
Publication date: 3 August 2012

Omar Masood, Hasan Al Suwaidi and Priya Darshini Pun Thapa

The purpose of this paper is to identify any differences between the Islamic and non‐Islamic banks in the UAE on credit risk management.

Downloads
3197

Abstract

Purpose

The purpose of this paper is to identify any differences between the Islamic and non‐Islamic banks in the UAE on credit risk management.

Design/methodology/approach

The study uses survey based methodology for data collection. The sample for the study consists of six commercial banks from UAE with three non‐Islamic and three Islamic banks and with 148 credit risk managers as respondents for the survey. The study aims to investigate factors which distinguish between Islamic and non‐Islamic banks in UAE. This is achieved by fitting a binary logistic regression model.

Findings

The study shows that the managers in Islamic banks now do not rely only on personal experiences and simple credit risk analysis. The Islamic banks appear also to be developing and practising the newer and robust techniques, in addition to traditional methods, to manage their credit risk in UAE compared to non‐Islamic banks, which indicates a possibility of further improvement in their credit risk management.

Originality/value

The paper uses questionnaire‐based methodology, which has not been used previously in the UAE financial sector, as well as in studies of credit risk management. Therefore, this research could become the cornerstone of further academic research in other developing countries using this methodology.

To view the access options for this content please click here
Article
Publication date: 1 February 2002

GUNTER DUFEY and FLORIAN REHM

The authors provide the reader with a simple introduction to credit derivatives. The article includes a broad overview of the market, estimates of the global market size…

Abstract

The authors provide the reader with a simple introduction to credit derivatives. The article includes a broad overview of the market, estimates of the global market size, and a description of the most widely used products.

Details

The Journal of Risk Finance, vol. 3 no. 3
Type: Research Article
ISSN: 1526-5943

To view the access options for this content please click here
Article
Publication date: 1 March 2006

Ali Fatemi and Iraj Fooladi

Proposes to investigate the current practices of credit risk management by the largest US‐based financial institutions. Owing to the increasing variety in the types of…

Downloads
12236

Abstract

Purpose

Proposes to investigate the current practices of credit risk management by the largest US‐based financial institutions. Owing to the increasing variety in the types of counterparties and the ever‐expanding variety in the forms of obligations, credit risk management has jumped to the forefront of risk management activities carried out by firms in the financial services industry. This study is designed to shed light on the current practices of these firms.

Design/methodology/approach

A short questionnaire, containing seven questions, was mailed to each of the top 100 banking firms headquartered in the USA.

Findings

It was found that identifying counterparty default risk is the single most‐important purpose served by the credit risk models utilized. Close to half of the responding institutions utilize models that are also capable of dealing with counterparty migration risk. Surprisingly, only a minority of banks currently utilize either a proprietary or a vendor‐marketed model for the management of their credit risk. Interestingly, those that utilize their own in‐house model also utilize a vendor‐marketed model. Not surprisingly, such models are more widely used for the management of non‐traded credit loan portfolios than they are for the management of traded bonds.

Originality/value

The results help one to understand the current practices of these firms. As such, they enable us to make inferences about the perceived importance of the risks. The paper is of particular value to the treasurers intending to better understand the current trends in credit risk management, and to academics intending to carry out research in the field.

Details

Managerial Finance, vol. 32 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 20 July 2021

King Carl Tornam Duho, Divine Mensah Duho and Joseph Ato Forson

This study explores the effect of income diversification strategy on credit risk and market risk of microfinance institutions (MFIs) in Ghana as an emerging market.

Abstract

Purpose

This study explores the effect of income diversification strategy on credit risk and market risk of microfinance institutions (MFIs) in Ghana as an emerging market.

Design/methodology/approach

The study is based on quarterly data of averagely 271 MFIs that have operated from 2016 to 2018. The dataset is unbalanced and pooled cross-sectional with 3,259 data points. The study measures the diversification strategy using income diversification indices, and accounting ratios to measure the other variables. We utilised the weighted least squares (WLS) approach to explore the nexus.

Findings

The findings show that income diversification is associated with better loan quality and credit risk management. Market risk increases with the level of income diversification of microfinance firms. It is evident that large MFIs can manage their credit risks well and can have a low default rate, depicting an overall U-shaped nexus. On the other hand, the effect of size on market risk is an inverted U-shaped. The effect of asset tangibility on credit risk is positively significant while the effect on market risk is negatively significant. High profitability enhances credit risk management leading to lower loan losses while in the case of diversified and profitable MFIs, they tend to invest more in government securities. The results suggest that MFIs that hold more cash and cash equivalents tend to have high loan loss provision and more government securities suggesting much attention should be paid to optimal cash management.

Practical implications

The results throw light on the credit risk and market risk profile of the firms and the effect of diversification strategies on them. The findings are relevant for effective macroprudential regulation, market regulation and prudential regulation of the microfinance sector.

Social implications

The findings reveal the nature of income diversification strategy of MFIs in emerging markets such as Ghana, pointing out how they affect the risk exposure of MFIs that lend to the pro-poor population.

Originality/value

This is a premier formal assessment of the nexus between income diversification strategies and risk management among MFIs that serve the pro-poor population in the emerging market context.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

To view the access options for this content please click here
Book part
Publication date: 28 October 2019

Angelo Corelli

Abstract

Details

Understanding Financial Risk Management, Second Edition
Type: Book
ISBN: 978-1-78973-794-3

To view the access options for this content please click here
Book part
Publication date: 7 October 2011

Roberto Violi

With the help of financial engineering – and equipped with the modern technique of risk management – securitisation was supposed to identify and evaluate risks and parcel…

Abstract

With the help of financial engineering – and equipped with the modern technique of risk management – securitisation was supposed to identify and evaluate risks and parcel them out to informed parties who could bear them. In hindsight, we can see that this somewhat simplistic thesis – espoused by market participants as well as the academic promoters of modern techniques of risk management – seemed to promise a great deal more than it could ultimately deliver. At this juncture, however, the danger of regulatory over-reaction – which might be throwing the baby (financial innovation) out with the bath-water (overlooking/under-pricing of risk) – is very real and (in my view) calls for policy measures of this sort should be resisted firmly not only by market participants but also by regulators. This is not to say that regulation should be seen as immune from responsibility in the unfolding of the current credit crisis (quite the opposite would more likely be closer to the truth). As we shall see below (Section “Financial Crisis and Credit Ratings Debacle in SF”), the best risk-management practices – and related tools available before the crisis – provided enough ammunition to caution against the uncertainty surrounding risk assessment for some categories of SF products. However, the increasing complexity embedded in an increasing number of deals did provide genuine new challenges even to best risk-management practices.

Details

Finance and Sustainability: Towards a New Paradigm? A Post-Crisis Agenda
Type: Book
ISBN: 978-1-78052-092-6

To view the access options for this content please click here
Article
Publication date: 20 May 2021

Muhammad Mushafiq, Muzammal Ilyas Sindhu and Muhammad Khalid Sohail

The main purpose of this study is to examine the relationship between credit risk and financial performance in non-financial firms.

Abstract

Purpose

The main purpose of this study is to examine the relationship between credit risk and financial performance in non-financial firms.

Design/methodology/approach

In order to test the relationship between Altman Z-score model as a credit risk proxy and the Return on Asset and Equity as indicator for financial performance with control variables leverage, liquidity and firm size. Least Square Dummy Variable regression analysis is opted. This research's sample included 69 non-financial companies from the Pakistan Stock Exchange KSE-100 Index between 2012 and 2017.

Findings

This study establishes the findings that Altman Z-score, leverage and firm size significantly impact the financial performance of the KSE-100 non-financial firms. However, liquidity is found to be insignificant in this study. Altman Z-score and firm size have shown a positive relationship to the financial performance, whereas leverage is inversely related.

Practical implications

This study brings in a new and useful insight into the literature on the relationship between credit risk and financial performance. The results of this study provide investors, businesses and managers related to non-financial firms in the KSE-100 index with significant insight about credit risk's impact on performance.

Originality/value

The evidence of the credit risk and financial performance on samples of non-financial firms has not been studied; mainly it has been limited to the banking sector. This study helps in the evaluation of Altman Z-score's performance in the non-financial firms in KSE-100 index as well.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

To view the access options for this content please click here
Article
Publication date: 24 May 2021

Mohsin Ali, Mudeer Ahmed Khattak and Nafis Alam

The study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of…

Abstract

Purpose

The study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of Islamic banking system, a fierce competition between Islamic and conventional banks have started to emerge which in turn is impacting credit riskiness of both banking system.

Design/methodology/approach

Using the system GMM technique on 283 conventional banks and 60 Islamic banks for the period of 2006–2017, this paper explores the important impact of size and competition on the credit risk in 15 dual banking economies.

Findings

The authors found that as bank competition increases credit risk seems to be reduced. On the size effect, the authors found that big Islamic banks are less risky than big conventional banks whereas small Islamic banks are riskier than small conventional banks. The results are robust for different panel data estimation models and sub-samples of different size groups. The findings of this paper provide important insights into the competition-credit risk nexus in the dual banking system.

Originality/value

The paper is specifically focused on credit risk in dual banking environment and tries to fill the gap in the literature by studying (1) do the Islamic and conventional banks exhibit a different level of credit risk; (2) does competition in the banking system impact the credit risk of Islamic and conventional banks and finally (3) do the big and small banks exhibit similar levels of credit risk.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

To view the access options for this content please click here

Abstract

Details

The Banking Sector Under Financial Stability
Type: Book
ISBN: 978-1-78769-681-5

1 – 10 of over 37000