Micro-behavioral Characteristics in a Recessionary Environment: Moral Hazard and Strategic Default

Ioannis Asimakopoulos, Dimitrios Malliaropulos, Panagiotis K. Avramidis and Nickolaos G. Travlos
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Panagiotis K. Avramidis: ALBA Graduate Business School
Nickolaos G. Travlos: ALBA Graduate Business School

Chapter 10 in Non-Performing Loans and Resolving Private Sector Insolvency, 2017, pp 227-253 from Palgrave Macmillan

Abstract: Abstract Using a unique data set of corporate loans of 13,070 Greek firms for the period 2008–2015 and an identification strategy based on the internal credit ratings of banks, the study provides evidence that one out of six firms with non-performing loans is a strategic defaulter. Furthermore, it investigates potential determinants of firms’ behavior by relating the probability of strategic default to a number of firm characteristics such as size, age, liquidity, profitability and collateral value. Among others, the analysis provides evidence of a positive relationship of strategic default with outstanding debt and economic uncertainty and a negative relationship with the value of collateral. Also, profitability and collateral can be used to distinguish the strategic defaulters from the financially distressed defaulters. Finally, the relationship of strategic default risk with firm size and age has an inverse U-shape, that is, strategic default is more likely among medium-sized firms compared to small and large firms and it is also more likely among middle-aged firms compared to new-founded and established firms.

Keywords: Non-performing loans; Greek banking system; Micro-behavioral characteristics; Moral hazard; Strategic default (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-50313-4_10

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DOI: 10.1007/978-3-319-50313-4_10

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