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
Date Written: 2009
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: Suggested Citation