Recovery Rates of Commercial Lending: Empirical Evidence for German Companies

Journal of Banking and Finance, Vol. 33, pp. 505-513, 2009

45 Pages Posted: 22 Feb 2007 Last revised: 30 Aug 2012

See all articles by Jens Grunert

Jens Grunert

University of Tuebingen - Department of Banking

Martin Weber

University of Mannheim - Department of Banking and Finance

Date Written: 2009

Abstract

There are very few studies concerning the recovery rate of bank loans. Prediction models of recovery rates are increasing in importance because of the Basel II-framework, the impact on credit risk management, and the calculation of loan rates. In this study, we focus the analyses on the distribution of recovery rates and the impact of the quota of collateral, the creditworthiness of the borrower, the size of the company and the intensity of the client relationship on the recovery rate. According to our hypotheses a higher quota of collateral leads to a higher recovery rate, whereas the creditworthiness of the borrower and the size of the company is negatively related to the recovery rate. Borrowers with an intense client relationship with the bank exhibit a higher recovery rate.

Keywords: Credit risk, Bank loans, Recovery rate

JEL Classification: G21, G28

Suggested Citation

Grunert, Jens and Weber, Martin, Recovery Rates of Commercial Lending: Empirical Evidence for German Companies (2009). Journal of Banking and Finance, Vol. 33, pp. 505-513, 2009, Available at SSRN: https://ssrn.com/abstract=964453

Jens Grunert (Contact Author)

University of Tuebingen - Department of Banking ( email )

Mohlstrasse 36
D - 72074 Tuebingen
Germany

Martin Weber

University of Mannheim - Department of Banking and Finance ( email )

D-68131 Mannheim
Germany
+49 621 181 1532 (Phone)
+49 621 181 1534 (Fax)

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