Excess Credit Risk and Bank's Default Risk: An Application of Default Prediction's Models to Banks from Emerging Market Economies

29 Pages Posted: 13 Sep 2004

See all articles by Christophe J. Godlewski

Christophe J. Godlewski

University of Strasbourg - Faculty of Law and Business; EM Strasbourg Business School; LaRGE Research Center

Date Written: April 2004

Abstract

The purpose of this paper is to investigate the regulatory and institutional factors which may increase excessive risk taking in banks. Few studies deal with the impact of these external factors on bank's risk taking and probability of default, despite the fact that empirical investigation is crucial for understanding the relationship between the regulatory, legal and institutional environement and bank's health, especially in emerging market economies. We apply a two step logit model to a database of banks from emerging market economies. Our results confirm the role of the institutional and regulatory environment as a source of excess credit risk, which increases bank failure risk. The integration of these environmental variables significantly contributes to the explanatory and discriminatory power of our model of bank default prediction.

Keywords: Excess credit risk, bank default, emerging market economies, institutional factors of default, two step logit model

JEL Classification: C35, G21, G28

Suggested Citation

Godlewski, Christophe J., Excess Credit Risk and Bank's Default Risk: An Application of Default Prediction's Models to Banks from Emerging Market Economies (April 2004). Available at SSRN: https://ssrn.com/abstract=588167 or http://dx.doi.org/10.2139/ssrn.588167

Christophe J. Godlewski (Contact Author)

University of Strasbourg - Faculty of Law and Business ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

EM Strasbourg Business School ( email )

61 Avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://www.em-strasbourg.eu/

LaRGE Research Center ( email )

1 place d'Athènes
Strasbourg, 67000
France

HOME PAGE: http://droit.unistra.fr/

Register to save articles to
your library

Register

Paper statistics

Downloads
684
Abstract Views
2,692
rank
36,893
PlumX Metrics