Determinants of Spread and Creditworthiness for Emerging Market Sovereign Debt:A Panel Data Study

This study uses a panel-data framework to identify the determinants of the spread over US Treasuries of emerging market sovereign issues as well as of the creditworthiness of the issuers,where the latter is represented by the Institutional Investor's creditworthiness index. We use a sample of 16 emerging market economies, together with time series data for the period 1998 to 2002 when analysing the spread, and from 1987 to 2001 when analysing the creditworthiness. The results suggest that for both the spread and the creditworthiness, significant explanatory variables include the economic growt rate, the debt-to-GDP ratio, the reserves-to-GDP ratio, and the debt-to-exports ratio. In addition, the spread is also determined by the exports-to-GDP ratio, and the debt service to GDP,while the creditworthiness is influenced by the inflation rate and a default dummy variable.

Creditworthiness and Matching Principles

You are creditworthy for φ-ing only if φ-ing is the right thing to do. Famously though, further conditions are needed too – Kant’s shopkeeper did the right thing, but is not creditworthy for doing so. This case shows that creditworthiness requires that there be a certain kind of explanation of why you did the right thing. The reasons for which you act – your motivating reasons – must meet some further conditions. In this paper, I defend a new account of these conditions. On this account, creditworthiness requires that your motivating reasons be normative reasons, and that the principles from which you act match normative principles

Learning Latent Representations of Bank Customers With The Variational Autoencoder

Learning data representations that reflect the customers' creditworthiness can improve marketing campaigns, customer relationship management, data and process management or the credit risk assessment in retail banks. In this research, we adopt the Variational Autoencoder (VAE), which has the ability to learn latent representations that contain useful information. We show that it is possible to steer the latent representations in the latent space of the VAE using the Weight of Evidence and forming a specific grouping of the data that reflects the customers' creditworthiness. Our proposed method learns a latent representation of the data, which shows a well-defied clustering structure capturing the customers' creditworthiness. These clusters are well suited for the aforementioned banks' activities. Further, our methodology generalizes to new customers, captures high-dimensional and complex financial data, and scales to large data sets.Comment: arXiv admin note: substantial text overlap with arXiv:1806.0253

Determinants of Spread and Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis

The study presented here is a follow-up study to Rowland and Torres (2004),who used a panel data framework together with data from 16 emerging market issuers to identify the determinants of the spread and the creditworthiness. Since many new issuers of emerging market sovereign debt have emerged recently, we can by using data from one single point in time, end of july 2003, expand our country set to 29 for the analysis of the spread and around 50 for the analysis of the credit ratings and the creditworthiness. We will used an OLS regression framework for the empirical analysis. The study identifies some seven variables that play a role in determining ratings, creditworthiness and spreads. These include the GDP per capita, the economic growth rate, the inflation rate, external-debt ratios, debt-service ratios, the level of international reserves, and the openness of the economy. Emerging market policy makers and investors should pay extra attention to these variables when defining economic policies and evaluating bond issues.

Short-term debt maturity, monitoring and accruals-based earnings management

Most prior studies assume a positive relation between debt and earnings management, consistent with the financial distress theory. However, the empirical evidence for financial distress theory is mixed. Another stream of studies argues that lenders of short-term debt play a monitoring role over management, especially when the firm’s creditworthiness is not in doubt. To explore the implications of these arguments on managers’ earnings management incentives, we examine a sample of US firms over the period 2003–2006 and find that short-term debt is positively associated with accruals-based earnings management (measured by discretionary accruals), consistent with the financial distress theory. We also find that this relation is significantly weaker for firms that are of higher creditworthiness (i.e. investment grade firms), consistent with monitoring benefits outweighing financial distress reasons for managing earnings

Who borrows among the poor? MC use determinants in Guatemala, with particular reference to social ties

Who borrows Micro Credit (MC) is the information needed to improve not only MC programs but also policies of poverty alleviation. This paper analyzes the MC use determinants taking social ties into account using data in Guatemalan Living Standard Measurement Study. It shows that the determinants are relatively different between the poor and the non-poor. It also shows that social ties could raise the possibility of MC utilization especially among the poor, which would verify the function of social ties as collateral of creditworthiness. Those excluded from MC may not be the poorest but the socially weakest.Micro Credit (MC), social ties, information asymmetry, creditworthiness, Guatemala,

Creditworthiness as a signal of trustworthiness

Creditworthiness and trustworthiness are almost synonyms since the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness-trustworthiness nexus in an investment game experiment on a sample of participants/non participants to a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. Trustees’ first and second order beliefs are also consistent with this picture. Our findings identify a “horizontal trustworthiness externality” which creates a direct (loan-performance) causality nexus since the mere loan provision increases the borrower’s attractiveness as a business partner.field experiment; microfinance; investment game; trust; trustworthiness

A Panel Data Analysis of the Repayment Capacity of Farmers

Using a balanced panel of 264 unique Illinois farmers from 2000 to 2004, this study identifies the most pertinent factors that explain the repayment capacity of farmers. After correcting for endogeneity bias caused by farmer-specific effects, one year lagged debt-to-asset ratio and soil productivity are both found to be significantly correlated with the coverage ratio at the 5% significance level using random effects. The finding is significant because it can enhance agricultural lenders ability to assess creditworthiness, screen borrowers, manage loan loss reserves, and price loans, thereby decreasing lenders costs associated with defaulted loans and ultimately reducing the costs borne by the government and taxpayers.panel data, random effects, coverage ratio, financial efficiency, solvency, liquidity, repayment capacity, profitability, creditworthiness, Agricultural Finance,

An econometric analysis of IBRD creditworthiness

The author econometrically ascertains the determinants of default to the International Bank for Reconstruction and Development (IBRD) through panel logit analysis. Creditworthiness with a lag of one period is determined by the extent of arrears to private creditors, the proportion of total debt service that is being paid, the government budget deficit, the extent of military involvement in the government of a country, and by the G7's current account balance. Default to the IBRD falls into a graduated hierarchy, whereby default occurs first to Paris Club and commercial bank creditors, with subsequent default triggered by portfolios with high proportions of IBRD and short-term debt, as well as the factors mentioned above. Default to these other creditor groups can be explained by more traditional country risk variables, although Mckenzie's analysis highlights the importance of political and external factors in explaining default to all creditors studied. He finds sovereign default to be a state-dependent process, whereby the repayment behavior of a country changes once it enters into default. Operationally, the author arrives at a model that can be used to assess short-term creditworthiness, although data imperfections and availability still limit the usefulness of the model for some countries. Longer-term risk assessment proves more difficult, which raises operational questions for the IBRD.Environmental Economics&Policies,Payment Systems&Infrastructure,Banks&Banking Reform,Economic Theory&Research,Strategic Debt Management,Strategic Debt Management,Economic Theory&Research,Environmental Economics&Policies,Financial Intermediation,Banks&Banking Reform

Banks and Real Estate Prices

The willingness of banks to provide funding for real estate purchases depends on the creditworthiness of their borrowers. Beside other factors, the creditworthiness of borrowers depends on the development of real estate prices. Real estate prices, in turn, depend on the demand for homes which is influenced by the willingness of banks to provide funding for real estate purchases. In this paper I develop a theoretical model which describes and explains this circular relationship. Using this model, I show how different kinds of expectation formations can lead to fluctuations of real estate prices. Furthermore, I show that banks make above average profits in the upswing phase of the real estate cycle but suffer high losses when the market turns.Credit Cycle, Real Estate Prices, Bubbles