Evaluation of Minimum Capital Requirements for Bank Loans to Smes

Düllmann, Klaus; Koziol, Philipp

doi:10.2139/ssrn.2796913

Cited by 4 publications

(2 citation statements)

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“…According toDullmann and Koziol (2013), since small firms are more likely to default due to their idiosyncratic risk, accounting information is the essential tool in SME default prediction models 5 This study follows the modelling approach ofChen et al (2010). In line with their study we also refer to this modelling approach as the Merton-KMV model.…”

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confidence: 98%

Predicting unlisted SMEs' default: Incorporating market information on accounting-based models for improved accuracy

Andrikopoulos

Khorasgani

2018

The British Accounting Review

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confidence: 98%

Predicting unlisted SMEs' default: Incorporating market information on accounting-based models for improved accuracy

Andrikopoulos

Khorasgani

2018

The British Accounting Review

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“…Dietsch and Petey (2004) for instance report asset correlation estimates for German SMEs, where it is visible that overall asset correlation estimates tend to be lower than estimates calculated for one PD bucket alone, but there are some outliers. Düllmann and Koziol (2013) provide a comprehensive overview of asset correlation studies some of which give further evidence of the inhomogeneity effects described in this paper.…”

Section: Discussionmentioning

confidence: 90%

Asset correlation estimation for inhomogeneous exposure pools

Wunderer¹

2019

JCR

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Asset correlations play an important role in credit portfolio modelling. One possible data source for their estimation are default time series. This study investigates the systematic error that is made if the exposure pool underlying a default time series is assumed to be homogeneous when in reality it is not. We find that the asset correlation will always be underestimated if homogeneity with respect to the probability of default (PD) is wrongly assumed, and the error is the larger the more spread out the PD is within the exposure pool. If the exposure pool is inhomogeneous with respect to the asset correlation itself then the error may be going in both directions, but for most PD-and asset correlation ranges relevant in practice the asset correlation is systematically underestimated. Both effects stack up and the error tends to become even larger if in addition we assume a negative correlation between asset correlation and PD within the exposure pool, an assumption that is plausible in many circumstances and consistent with the Basel RWA formula. It is argued that the generic inhomogeneity effect described in this paper is one of the reasons why asset correlations measured from default data tend to be lower than asset correlations derived from asset value data.

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The impact of Basel II on the debt costs of German SMEs

Schindele

Szczesny

2015

J Bus Econ

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We investigate the ex-post effects of the Basel II reform on the debt costs of German small and medium-sized enterprises (SMEs). We assume that Basel II formalized the credit assessment procedure of banks and that especially SMEs might face higher costs of debt as they tend to have comparably high proportions of bank credit, and consequently lower ratings than bigger companies. Beyond that, banks might try to refinance those additional rating costs by imposing higher interest rates on debtors. The results presented in our paper indicate a significant overall rise of debt costs of SMEs that have debt relations with IRBA-certified banks since 2007. Furthermore, low-risk companies benefit from comparably lower loan rates, whereas risky firms face comparably higher loan costs than before. The results are less obvious for SMEs that are rated under RSA, but still present for highly risky companies. We test for several influences of the financial crisis. However, we do not find convincing arguments that would reason a rise of the costs of debt in regard of the crisis. Yet, we still observe higher debt costs of SMEs, particularly of highly risky companies, since 2007 that indicate a change of bank lending behavior in Germany.

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Evaluation of Minimum Capital Requirements for Bank Loans to Smes

Cited by 4 publications

References 7 publications

Predicting unlisted SMEs' default: Incorporating market information on accounting-based models for improved accuracy

Predicting unlisted SMEs' default: Incorporating market information on accounting-based models for improved accuracy

Asset correlation estimation for inhomogeneous exposure pools

The impact of Basel II on the debt costs of German SMEs

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