Fractional reserve regimes generate fragile banking, and full reserve regimes (e.g., narrow banking) remove fragility at the cost of suppressing the role of banks as lenders. A Central Bank Digital Currency (CBDC) could provide safe money, but at the cost of potentially disrupting bank lending....

A crucial role belongs to export firms in the export-led growth model of Vietnam. The COVID-19 disease has posed a serious challenge to the Vietnamese economy, having negatively impacted its influential export sector. However, investigating this export sector encounters small sample issues...

Payday loans, consumer leases and, increasingly, buy-now-pay-later (BNPL) products occupy a central place in Australian consumer law and policy debates. These products have all been identified by consumer advocates as a source of financial stress. Credit cards typically receive far less...

Using the statistical relationships between market values of banks’ assets and their volatilities that are implied from banks’ shareholders’ values of publicly held banks and their financial statement-based variables, which are used to compute banks’ probabilities of default, we conduct...

The worldwide spread of the COVID-19 pandemic (Pandemic) and after that lockdown has shaken the different sectors of the economy. For that government had started many initiatives to support the economy. As part of that, Finance Minister Smt. Nirmala Sitaraman had announced a temporary suspension...

This paper takes the spectrum approach to identify possible industrial and enterprise insolvency and goes on to conduct a composite analysis of both the potential industry insolvency spectrum and enterprise insolvency spectrum. Recently, the proportion of industries and enterprises showing signs...

Sovereign debt restructurings are associated with declines in the growth of GDP, investment, bank credit to the private sector and capital flow. Our empirical findings show that the intensity of these losses depends on two aspects: whether the restructuring preempts a default and the extent of...

The role of multilateral lenders in sovereign default has been traditionally overlooked by the literature. However, these creditors represent a significant share of lending to emerging markets and feature very distinct characteristics, such as lower interest rates and seniority. By including...

This case study examines the scandal at Wirecard AG, a German payment processing and financial services company, which filed for insolvency in June 2020. The scandal involved accounting fraud and misreporting of revenue, and was first uncovered by Financial Times journalists in 2019. The case...

In the paper, authors compare Bayesian approaches to the calibration of default probability curves: a) a standard approach based on the use of logarithm of odds, b) a modified approach based on the use of logarithm of odds ratio which explicitly includes the prior probability of default in the...

Sri Lanka defaulted on repayment of its external public debt in April-May 2022 for the first time in its history and was the first Asian country to do so in the past quarter century. This Working Paper provides an incisive account of the repeated blunders made by successive Governors as well as...

For a long time, the European insolvency laws have been considered as country-specific regulations, entirely focused on national needs and expectations. This perception depends on several factors. First, the debtor’s financial distress tends to be systematic by naturally expanding its effects...

Global climate change is increasing the frequency and severity of natural disasters. We use detailed consumer credit data to investigate the impact of the 2016 Fort McMurray wildfire, the costliest wildfire disaster in Canadian history, on consumers' financial stress. We focus on the arrears of...

A vast majority of Loss Given Default (LGD) models are currently in use. Over all the years since the new Capital Accord was published in June 2004, there has been increasing interest in the modelling of the LGD parameter on the part of both academics and practitioners. The main purpose of this...

As the debt ceiling episode unfolds, we highlight a sharp increase in activity across the U.S. credit default swaps (CDS) market and infer the likelihood of a U.S. default from these market prices. Beginning in January 2023, we document a significant increase in U.S. CDS trading activity and...

The 2008 financial crisis was one of the most severe economic downturns in recent history, resulting in massive job losses and economic damage across the globe. The failures and weaknesses of corporate governance played a significant role in the crisis, particularly in safeguarding against...

The research looks at how financial crisis affects the performance of Nepalese commercial banks. The dependent variables are return on assets and Z-score. Liquidity ratio, leverage ratio, capital adequacy ratio, spread rate, credit risk, credit to deposit ratio, and loan loss provision are the...

In this study, we revisit Uribe's (2006, Journal of Monetary Economics) `fiscal theory of sovereign risk,' which suggests a trade-off between stabilizing inflation and suppressing default. Unlike Uribe (2006), we develop a class of dynamic stochastic general equilibrium models in which the...

This paper investigates whether intra-industry debt defaults generate a contagion effect by influencing financial decisions and capital allocation efficiency of peers within the industry. Additionally, we examine the mechanism of intra-industry default contagion. Using theoretical and empirical...

The bankruptcy risk matrix helps interpret the outcome of bankruptcy prediction models. The study introduces the bankruptcy risk matrix and applies the bankruptcy risk matrix on most recent bankruptcy risk data on listed US companies

In this testimony to the House Ways and Means Committee on February 1, 1989 (when LBOs and other highly leveraged transactions were under fierce attack by politicians and the media), the author identified “LBO associations” such as KKR and Forstmann Little as a valuable innovation in...

We investigate the role of social structure in mortgage market risk-taking behavior and its economic implications in terms of mortgage loss. Focusing on conforming loans, we start by showing that the local risk-taking atmosphere is associated with higher loan-to-value ratios. Next, we verify the...

Latin America is a growing financial market. The performance of its private sector corporations is critical, as inadequate performance and financial distress can result in losses for many people. This study analyses the efficacy of Logistic Regression (LR) and Random Forest (RF) techniques for...

Despite the obvious benefits and growing popularity of Machine Learning (ML) technology, there are still concerns regarding its ability to provide Financial Distress Prediction (FDP). An accurate FDP model is required to avoid financial risk at the lowest possible cost. However, in the Internet...

We analyze the effect of external financing and associated bankruptcy threat on the speed of product innovation in a market characterized by technological and demand uncertainty. In a dynamic market setting we characterize the optimal R&D investment strategy of a monopolistic incumbent firm that...

The main purpose of this study is to understand how Portuguese restaurants' solvency was affected by the COVID-19 pandemic, considering the factors that influence it. Financial information was collected for the years 2019 and 2020 in the SABI database to elaborate a quantitative methodology; a...

Prior evidence suggests a puzzling absence of compensating returns to the common stocks of highly-distressed companies. I examine three sets of highly-distressed common stocks - one set from the crash of the internet bubble (1999 to 2002), one from the financial crisis (2007 through 2008), and...

There is increasing regulatory interdependence amongst Central, East and South East Asian, European and North American financial markets, and these markets account for over one-third of the world’s population and global financial markets. As Asian markets become more integral to global...

This paper studies the relationship between climate risk and credit risk. We find a negative correlation between emission levels and default risk once firm's fixed characteristics are taken into account. By breaking down Moody's Expected Default Frequencies (EDFs) into its main components, we...

This paper examines the relationship between modern health pandemic crises and financial stability. Specifically, it collects data on 250,223 firms in 43 countries (or regions) during five modern pandemic crises, SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014), and Zika (2016), and finds...

This paper explores whether and how corporate social responsibility behavior affects firm value in highly distressed firms. Our results show that sustainability activity is a powerful instrument by which to strategically prevent damage to the company in the form of liquidation risk. Stronger...

The recent spate of global crises, including Covid-19 pandemic, Russia-Ukraine war and the Sri Lankan crisis, have hindered the economic growth of almost all nations. The prevailing economic downturn has forced many organizations to assess their financial future and the possibility of financial...