Explaining Corporate Credit Default Rates with Sector Level Detail

Lubomira Gertler, Kristina Janovicova-Bognarova and Lukas Majer
Additional contact information
Kristina Janovicova-Bognarova: University of Economics, Bratislava, Slovakia
Lukas Majer: University of Economics, Bratislava, Slovakia

Czech Journal of Economics and Finance (Finance a uver), 2020, vol. 70, issue 2, 96-120

Abstract: We model corporate loan default rates in four main economic sectors using quasi-panel methods and find that economic sectors respond differently to changing economic and financial conditions in terms of time, intensity or dynamics. We propose using techniques that allow both long run and short run components, while maintaining a flexible unified framework to capture heterogeneity across economic sectors (error correction panels). We also undertake a stress testing exercise, which justifies more granular level modelling due to heterogeneity across sectors. We conclude that such unified framework provides more robust results. From practical point of view, evidence from Slovak corporate sector confirms that construction sector is far more vulnerable to shocks than manufacturing, business services or trade.

Keywords: banking; corporate default risk; credit risk; stress tests (search for similar items in EconPapers)
JEL-codes: C15 C23 G21 G33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journal.fsv.cuni.cz/mag/article/show/id/1456 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:70:y:2020:i:2:p:96-120

Access Statistics for this article

More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().