Considering the fundamental role played by small and medium sized enterprises (SMEs) in the economy of many countries and the considerable attention placed on SMEs in the new Basel Capital Accord, we ...develop a distress prediction model specifically for the SME sector and to analyse its effectiveness compared to a generic corporate model. The behaviour of financial measures for SMEs is analysed and the most significant variables in predicting the entities’ credit worthiness are selected in order to construct a default prediction model. Using a logit regression technique on panel data of over 2,000 U.S. firms (with sales less than $65 million) over the period 1994–2002, we develop a one‐year default prediction model. This model has an out‐of‐sample prediction power which is almost 30 per cent higher than a generic corporate model. An associated objective is to observe our model's ability to lower bank capital requirements considering the new Basel Capital Accord's rules for SMEs.
Several contributions in the literature argue that a significant in-sample risk reduction can be obtained by investing in a relatively small number of assets in an investment universe. Furthermore, ...selecting small portfolios seems to yield good out-of-sample performances in practice. This analysis provides further evidence that an appropriate preselection of the assets in a market can lead to an improvement in portfolio performance. For preselection, this paper investigates the effectiveness of a minimum variance approach and that of an innovative index (the new Altman Z-score) based on the creditworthiness of the companies. Different classes of portfolio models are examined on real-world data by applying both the minimum variance and the Z-score preselection methods. Preliminary results indicate that the new Altman Z-score preselection provides encouraging out-of-sample performances with respect to those obtained with the minimum variance approach.
► We investigate whether banks’ risk management structure affects their crisis-performance. ► We use a sample of up to 372 US banks and focus on the credit crisis of 2007/2008. ► Banks with a CRO, ...who directly reports to the board of directors, perform better. ► Standard corporate governance mechanisms do not improve banks’ crisis performance.
The recent financial crisis has raised several questions with respect to the corporate governance of financial institutions. This paper investigates whether risk management-related corporate governance mechanisms, such as for example the presence of a chief risk officer (CRO) in a bank’s executive board and whether the CRO reports to the CEO or directly to the board of directors, are associated with a better bank performance during the financial crisis of 2007/2008. We measure bank performance by buy-and-hold returns and ROE and we control for standard corporate governance variables such as CEO ownership, board size, and board independence. Most importantly, our results indicate that banks, in which the CRO directly reports to the board of directors and not to the CEO (or other corporate entities), exhibit significantly higher (i.e., less negative) stock returns and ROE during the crisis. In contrast, standard corporate governance variables are mostly insignificantly or even negatively related to the banks’ performance during the crisis.
Using data from three countries (US, Italy and Australia) and surveying related studies from several other countries in Europe, we investigate the effects of the New Basel Capital Accord on bank ...capital requirements for small and medium sized enterprises (SMEs). We find that, for all the countries, banks will have significant benefits, in terms of lower capital requirements, when considering small and medium sized firms as retail customers. But they will be obliged to use the Advanced IRB approach and to manage them on a pooled basis. For SMEs as corporate, however, capital requirements will be slightly greater than under the existing Basel I Capital Accord. We believe that most eligible banks will use a blended approach (considering some SMEs as retail and some as corporate). Through a breakeven analysis, we find that for all of our countries, banking organizations will be obliged to classify as retail at least 20% of their SME portfolio in order to maintain the current capital requirement (8%). PUBLICATION ABSTRACT
A number of innovations have been introduced in the last five years to counter the devastating impact of credit rationing in Europe, particularly from traditional bank lending. This is a major ...problem for the small and medium size firms' sector in Europe, which has also suffered from bank regulatory concerns of capital adequacy, heightened emphasis on default risk of bank counterparties and the general malfunctioning of credit extension and private sector growth. In Italy, some of these less traditional sources of funding for SMEs have started to become more popular and the development of the mini-bond market is a clear example. We believe “mini-bonds” can be a success in Italy as long as the market supplies an attractive risk/return tradeoff to investors as well as affordable and flexible financing for borrowers. Assessments of credit risk must be convincing and objective, providing complements to the traditional rating agency process. In this study, we develop a new innovative model to assess SMEs' creditworthiness and we test it on the companies that have issued mini-bonds so far. Our findings confirm that the amount of information asymmetry is still high in the market and is affecting the level of risk/return trade off potentially reducing the number of investors and small businesses that would be interested in using this new channel to fund their business growth.
Few studies that have focused on developing credit risk models specifically for small and medium-sized enterprises (SMEs) have included non-financial information as a predictor of company ...creditworthiness. In this study we have available non-financial, regulatory compliance and "event" data to supplement the limited accounting data that is often available for non-listed firms. We employ a sample consisting of over 5.8 million sets of accounts of unlisted firms, of which over 66,000 failed during the period 2000-2007. We find that data relating to legal action by creditors to recover unpaid debts, company filing histories, comprehensive audit report/opinion data and firm-specific characteristics make a significant contribution to increasing the default prediction power of risk models built specifically for SMEs. PUBLICATION ABSTRACT
ATLAS fast physics monitoring: TADA Sabato, G; Elsing, M; Gumpert, C ...
Journal of physics. Conference series,
10/2017, Volume:
898, Issue:
9
Journal Article
Peer reviewed
Open access
The ATLAS experiment at the LHC has been recording data from proton-proton collisions with 13 TeV center-of-mass energy since spring 2015. The collaboration is using a fast physics monitoring ...framework (TADA) to automatically perform a broad range of fast searches for early signs of new physics and to monitor the data quality across the year with the full analysis level calibrations applied to the rapidly growing data. TADA is designed to provide fast feedback directly after the collected data has been fully calibrated and processed at the Tier-0. The system can monitor a large range of physics channels, offline data quality and physics performance quantities. TADA output is available on a website accessible by the whole collaboration. It gets updated twice a day with the data from newly processed runs. Hints of potentially interesting physics signals or performance issues identified in this way are reported to be followed up by physics or combined performance groups. The note reports as well about the technical aspects of TADA: the software structure to obtain the input TAG files, the framework workflow and structure, the webpage and its implementation.
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