Default Term Research Articles

The presumption of realism

AbstractWithin contemporary metaethics, it is widely held that there is a “presumption of realism” in moral thought and discourse. Anti-realist views, like error theory and expressivism, may have certain theoretical considerations speaking in their favor, but our pretheoretical stance with respect to morality clearly favors objectivist metaethical views. This article argues against this widely held view. It does so by drawing from recent discussions about so-called “subjective attitude verbs” in linguistics and philosophy of language. Unlike pretheoretically objective predicates (e.g., “is made of wood”, “is 185 cm tall”), moral predicates embed felicitously under subjective attitude verbs like the English “find”. Moreover, it is argued that the widespread notion that moral discourse bears all the marks of fact-stating discourse is rooted in a blinkered focus on examples from English. Cross-linguistic considerations suggest that subjective attitude verbs are actually the default terms by which we ascribe moral views to people. Impressions to the contrary in English have to do with some unfortunate quirks of the term “think”.

Effectiveness of Credit Terms on Management of Non-Performing Loans in Kenyan Commercial Banks

This study sought to establish the effectiveness of Credit Terms on Management of Non-Performing Loans in Kenyan Commercial Banks. The specific objective was to establish how credit term was effective in managing non-performing loans by reviewing credit period, credit limit, interest rates and default term within the corporate, business and personal segments of commercial banks in Kenya. The study was guided by both the Theory of Information Asymmetry and Credit Scorecard theories. An explanatory research design was adopted employing both simple random and stratified sampling techniques. The sample comprised 222 credit officers employed in the 41 commercial banks in Kenya. Structured questionnaires were applied to the credit officers in the collection of primary data. Cronbach’s alpha and factor analysis were applied in testing both the reliability and validity of the research instruments. A multiple regression model using SPSS (Version 23) was used in the analysis of the obtained data and to test the hypotheses. The study identified that credit terms (ꞵ= .570) had a positive and significant effect on management of nonperforming loans. In regard to this new knowledge, the study recommends that credit terms be adopted by the management of commercial banks and policymakers. This will help the banks increase their profitability, enhance their growth and cope with the intense competition within the banking industry.

Gelişmekte Olan Ülkelerde Kredi Temerrüt Takası (CDS) Primlerinin Belirleyicileri: Türkiye'den Kanıtlar

Turkey faces increasing CDS (Credit Default Swap) spreads. The level of CDS spreads shows the riskiness of a country in terms of credit default and countries can’t attract high foreign investment inflows when CDS spreads are high. In this context, countries need to identify the influential factors in order to decrease CDS spreads. In this study, ten independent variables classified in global, macro, and market factors are analyzed using monthly data between January 2004 and December 2019 with autoregressive distributed lag (ARDL), fully modified least square (FMOLS), dynamic ordinary least square (DOLS), and Markov Switching Regression (MSR) after applying principal component analysis (PCA). The results show that (i) market component has a greater effect than other components for all models, which indicates that it is the most important variable for Turkey’s CDS spreads; (ii) global and market components are positive and statistically significant for the ARDL, FMOLS, and DOLS models; (iii) macro component is negative for all models.

Dividend payout strategies and bank survival likelihood: A cross-country analysis

In this cross-country study, we examine whether dividend payout decisions affect the survival likelihood of banks. Using unique international banking data from 11 countries from 2010 to 2019, we find that higher levels of cash dividend payouts increase a bank's survival likelihood, as paying dividends lowers agency problems and cost of debt and facilitates greater public monitoring. Our extended analysis shows an inverted U-shaped relation between large dividends and survival likelihood. At higher levels, payout is related to a safer position of banks in terms of default; however, at very high levels of dividends, when the levels of payouts exceed a threshold, such payout lowers the likelihood of survival. We additionally investigate the effect of the bank type to assess whether differential effects could be realised under the constrained dividend model of Islamic banks compared to the conventional banking model. Our results, interestingly, show that the positive effect of dividend payouts on bank survival is more pronounced in conventional than Islamic banks. This finding is explained by the dominant liquidity management challenges pertaining to the Islamic banking business model in which banks retain more cash and pay lower dividends. Our findings offer important insights and policy implications for regulators, bankers and a broad set of stakeholders engaging with both banking sectors.

Covid-19, corporate survival and public policy: The role of accounting information and regulation in the wake of a systemic crisis

The economic crisis triggered by the Covid-19 pandemic prompted governments to issue several relief mechanisms to hold up companies and workers. This study analyzes how accounting information and regulation can support policymakers in the wake of a systemic crisis. Based on an accounting-based framework and readily available data from financial statements, it forecasts the impact of the crisis in terms of losses, equity depletion, and corporate defaults, absent government intervention. Next, it quantifies the costs and effects of five relief mechanisms in alleviating the risk of generalized corporate bankruptcies. The effects of the health pandemic and relief mechanisms on profitability and equity shortfalls are estimated for a sample of 586,076 privately held Italian firms. The findings indicate that the number of companies facing bankruptcy risk would increase from 65,463 (11% of the population) in 2019 to 153,681 (26%) in 2020, absent any government intervention. Altogether, these firms employ 1.4 million employees and have a total exposure to the financial industry equal to €68 billion in loans. Next, we assess the effects of relief mechanisms introduced by the Italian government to support corporations, whose aggregate costs reach €49.33 billion in 2020, and find that the interventions ‘rescue’ about 43,000 firms otherwise in default. Finally, the study adds to the debate on the role of accounting regulation in the wake of a systemic crisis by (a) discussing the effects of temporary changes to accounting rules on the informativeness and transparency of financial statements, and (b) suggesting alternative ways to modify accounting rules to safeguard corporate survival without compromising the informativeness of financial statements once the crisis reaches a halt.

Structuring Key Credit Risk Parameters for Regulated Electric and Gas Utilities under Alternative Moody’s Rating Methodologies: A Case Study for a Natural Gas Distribution Utility

This paper elaborates the relevancy issue of a rating model in the context of credit rating analysis process of a natural gas distribution company. Against this background, we have analysed the Moody’s Analytics Risk Calc™ v3.1 Emerging Markets and the Regulated Electric and Gas Rating Methodology of Moody’s Investor Services dated from March the 16th, 2017. Methodologically, the article relies on case studies namely the Enron case and a case from regulated natural gas distribution company in Turkey. In terms of findings, Enron case highlights the importance of point-in-time rating models over agency based rating models in terms of default prediction. The EDF model provided a PD value of 0.65%, which corresponds to Baa3 level in Moody’s rating agency terms. On the other hand, the REGU Model indicates the Company with “Ba” rating, which is a “Speculative Grade”. This result indicates us a severe difference in default probabilities for the same entity. This is consequent and in line with the informational needs of different users and if different models are used respective to their needs. In summary, each rating model is developed by rating agencies for different purposes and we need to choose the appropriate rating model to make accurate analysis.

Real earnings management through syndicated lending

I examine whether banks manage syndicated loan originations to achieve financial reporting goals. Using a large sample of loans and relying on a within-quarter analysis, I find that publicly traded banks that narrowly beat earnings benchmarks initiate more loans in the last month of the fiscal quarter to book origination fees. Relative to otherwise similar loans, these loans are associated with front-end fees that are 4.2% higher but have credit spreads that are 3.3% lower, resulting in a net price discount of 2.5%. The findings are stronger for bigger banks, for lenders that are funding-constrained, and for banks whose managers’ pay is more sensitive to stock performance. Further, these loans underperform in terms of future defaults and rating downgrades. Finally, I find that while the hypothesized earnings management helps banks raise capital in the short term, it is costly in the longer term, as it is associated with lower capital and profitability ratios. Overall, I provide model-free evidence on banks’ real earnings management and the costs of this behavior.

Default Vegetarianism and Veganism.

This paper describes a pair of dietary practices I label default vegetarianism and default veganism. The basic idea is that one adopts a default of adhering to vegetarian and vegan diets, with periodic exceptions. While I do not exhaustively defend either of these dietary practices as morally required, I do suggest that they are more promising than other dietary practices that are normally discussed like strict veganism and vegetarianism. For they may do a better job of striking a balance between normative concerns about contemporary farming practices and competing considerations of life. Additionally, I argue that framing discussions in terms of defaults is useful for various reasons: it helps organize agreements and disagreements, it more accurately reflects the way people conceptualize their dietary practices, and it presents a more dialectically effective view.

Calculating Coloniality in Higher Education

This keynote explores the idea that coloniality describes the emergent and future state of higher education. Coloniality refers to the ongoing systems, practices and patterns of power that echo and repeat colonial forms of engagement, in which we are all participants. Through dominant digitally-mediated extractive business models, these practices are becoming the default terms of social and educational relationships and are being internalised, normal and lived. The talk will consider the key ongoing colonial characteristics which echo historically, and which are being re-enacted and reinscribed in the present. The characteristics which will be elaborated on are : 1) central goals of profit making and market expansion, enabled by technology 2) the exploitation of natural resources and of human beings 3) the promise of improvement and progress through shared belief systems 4) premised on, amplifying and engendering inequality 5) Assimilation as a central strategy of buy-in and 6) a homogenised culture and filtered world view.
 
 To conclude, there will be some thoughts on responding to this state of coloniality given that it is the dominant reality for scholars, educators and students in higher education, even more deeply entrenched due to the pandemic.
 References
 https://czernie.weebly.com

Do Mortgage Lenders Compete Locally? Implications for Credit Access

We study the impact of mortgage lender concentration on household credit access. An extensive literature has found little to no relationship between local lender concentration and mortgage interest rates; consequently, federal regulators regard mortgage markets as national and view their local concentration as irrelevant to financial regulation and monetary policy. We argue that this view is incomplete, showing that although local concentration has no influence on interest rates, it strongly affects lending standards and upfront fees. In more concentrated areas, mortgage application rejection rates are higher (this effect is particularly pronounced for low-income, female, and racial-minority applicants), and the pool of originated mortgages is less risky in terms of both ex-ante credit scores and ex-post default. On the intensive margin, lenders charge higher fees in more concentrated markets: non-interest fees are on average 35 basis points higher in the 10% most concentrated markets than in the 10% least concentrated markets. Again, these effects are strongest among minority applicants. Our findings suggest that contrary to current policy, regulators concerned with credit access should regard mortgage markets as local when making policy decisions such as bank merger approvals.

Constructing a Picturesque Spain: An Empirical Approach to Women Travelogues Written in English (1842–1949)

Constructing a Picturesque Spain: An Empirical Approach to Women Travelogues Written in English (1842–1949) Alberto Egea Fernández-Montesinos “The picturesque is a grammar of images with layered effects.” (Conron 67) “Our souvenirs of Córdova are a mixture of mezquitas and mosquitos.” (Pitt Byrne 317) The search for the picturesque has been a traveler’s obsession for centuries. In the case of Spain, discovering a hidden oriental view of the Alhambra, unveiling a non-touristic tablao for authentic flamenco or just capturing a shot of a picturesque character has been a commonplace endeavor for visitors since the advent of modernity. In this search for the hidden picturesque that reaches to this day, accidents of tourists falling into a lake or suffering an accident from a cliff are unfortunately common as seen in popular travel blogs and trending Instagram pics. These types of misfortunes might seem very postmodern for some, but its origins can be traced back precisely to the beginnings of the use of the term ‘picturesque’. In his comic poem of 1812, William Combe presents Dr. Syntax’s travels and how he stumbles into a lake while attempting to reach the best location for the perfectly picturesque sketch of a ruined castle [Figure 1]. Besides this anecdotical fall, what makes Coombe’s book a pioneer is how it questions the British obsession with the aesthetics of the picturesque. Combe formulates a critical voice right at the peak of the debate about the three main categories of representation of the time: The Beautiful, the Sublime, and the newly formulated Picturesque.1 Coombe’s work is a foundational piece in this regard since the author satirized the aesthetic ideals lying behind the picturesque which is precisely the main topic of this essay. The following pages explore why the picturesque was so extensively and obsessively used for decades to describe anything Spanish. The purpose is to understand why this term [End Page 112] was chosen and what effects it has had in the construction of an image of Spain which persists to this day. A good point of departure could be to ask oneself what was there about Spain that made the writing and reading of travel narratives so attractive for such a large audience in various English-speaking countries. To this end, I propose a classification of the various acceptations of the term ‘picturesque’ trying to establish when and how it is applied to a wide variety of situations, characters, objects and enclaves. The classification resulting with the various meanings of ‘picturesque’ can serve as a propaedeutic for future nation branding analysis and travel studies.2 Click for larger view View full resolution Figure 1. “Doctor Syntax Tumbling into the Water” (106). This image is licensed with a CC BY-NC-SA 2.0 permit from Creative Commons. Picturesque seems to be the default term to refer to Spain from a foreign gaze in this very diverse corpus of writers and travelogues. No matter the geographical origin of the author, the time period of the trip or the regions visited, one common denominator was the use of the term ‘picturesque’. If one adjective had to be chosen to summarize how Spain is represented out of the diversity of texts, decades, and authors, it would be the term ‘picturesque’. From northern Spanish farmers to folkloric costumes, from oriental architecture to culinary customs, from landscapes to historical characters, all of them were unequivocally described as picturesque. Regarding the authors of the travelogues, during the last two centuries, numerous women writers arrived in Spain from the United Kingdom, the United States and other English-speaking countries, and dedicated a significant part of their leisure time to writing about various aspects of Spanish culture. The critical attention obtained by their travelogues is surprisingly insignificant compared to that of their male counterparts. Even if these [End Page 113] women texts have literary, anthropological and rhetorical values worth analyzing, there has been very little interest in studying the same processes which took place in accounts written by men.3 This neglect is more surprising if we consider the important number of travelogues written by these women which have become available recently through new digital databases...

Risk assessment for financial accounting: modeling probability of default

Purpose This paper aims to introduce and tests models for point-in-time probability of default (PD) term structures as required by international accounting standards. Corresponding accounting standards prescribe that expected credit losses (ECLs) be recognized for the impairment of financial instruments, for which the probability of default strongly embodies the included default risk. This paper fills the research gap resulting from a lack of models that expand upon existing risk management techniques, link PD term structures of different risk classes and are compliant with accounting standards, e.g. offering the flexibility for business cycle-related variations. Design/methodology/approach The author modifies the non-homogeneous continuous-time Markov chain model (NHCTMCM) by Bluhm and Overbeck (2007a, 2007b) and introduces the generalized through-the-cycle model (GTTCM), which generalizes the homogeneous Markov chain approach to a point-in-time model. As part of the overall ECL estimation, an empirical study using Standard and Poor’s (S&P) transition data compares the performance of these models using the mean squared error. Findings The models can reflect observed PD term structures associated with different time periods. The modified NHCTMCM performs best at the expense of higher complexity and only its cumulative PD term structures can be transferred to valid ECL-relevant unconditional PD term structures. For direct calibration to these unconditional PD term structures, the GTTCM is only slightly worse. Moreover, it requires only half of the number of parameters that its competitor does. Both models are useful additions to the implementation of accounting regulations. Research limitations/implications The tests are only carried out for 15-year samples within a 35-year span of available S&P transition data. Furthermore, a point-in-time forecast of the PD term structure requires a link to the business cycle, which seems difficult to find, but is in principle necessary corresponding to the accounting requirements. Practical implications Research findings are useful for practitioners, who apply and develop the ECL models of financial accounting. Originality/value The innovative models expand upon the existing methodologies for assessing financial risks, motivated by the practical requirements of new financial accounting standards.

Grounds for initiating proceedings in the case of insolvency of an individual

The article specifies the grounds for initiating proceedings in the case of insolvency of an individual on the basis of a comprehensive comparative analysis of foreign experience, scientific literature, national legislation and practice of its application. Based on the analysis of the legislation and case law, it is noted that the Bankruptcy Code does not clearly define the term "threat of insolvency". Article 115 of the Code states that the threat of insolvency includes circumstances that confirm that in the near future the debtor will not be able to meet its monetary obligations or make normal current payments. It is argued that the lack of definition of "threat of insolvency" in the Code is a shortcoming of current legislation, and therefore this rule needs to be clarified in terms of confirming the inability of the debtor to meet financial obligations, the terms of default. It is proposed to define "threat of insolvency" as a set of documented legal grounds that indicate the inability of the debtor to meet its own financial obligations or make regular financial payments over the next two months. The expediency of determining in Article 115 of the Bankruptcy Procedure Code an exclusive list of grounds for initiating insolvency proceedings against an individual is argued. Consolidation in Art. 115 of the Code of the inexhaustible list complicates law enforcement as provides a possibility of application of norms of other regulatory legal acts; provides wide discretion to the court, which creates conditions for the abuse of procedural rights for both participants in the bankruptcy proceedings and judges. The peculiarities of initiating proceedings to restore the solvency of an individual are specified: only the debtor himself may apply to the court to declare an individual insolvent. In order to reduce the financial burden on an insolvent individual in the implementation of bankruptcy proceedings, it is proposed to give the creditor the right to initiate legal proceedings for the insolvency of such a person.

The Essential Roles of Agency Law

This Article suggests a fundamental shift in how we think about agency. The essential function of agency law lies not only in enabling the delegation of authority, as is widely suggested, but as significantly in its effect on creditors’ rights through asset partitioning. There is an increasing temptation in legal scholarship to treat agency law as a sideshow confined to the first day of corporations class. This is because much of what agency law does in commerce could simply be accomplished through standard-form contracts that provide default terms for the relationships among firms, their managers, and third parties. Even agency’s much-vaunted fiduciary duties can easily be altered or waived by contract—and often are. This Article identifies the essential roles of agency law, which parties could not contractually replicate, and the important efficiencies that flow from them. Agency’s essential roles in commercial enterprise are twofold: first, to permit one person to attribute the legal significance of his or her acts to another, and second, to facilitate asset partitioning. Just as limited liability partitions off the assets of a firm’s owners from the assets of the firm itself, agency law partitions off the assets of a firm’s managers from the firm’s own assets. Recognizing this function reframes the usual staging of contractual disputes in agency as a zero-sum balancing act between the interests of third parties and of principals. Whether owners or managers should be liable for a firm’s unpaid contracts is not just a win-lose distributional question—pitting the firm’s creditors against insiders—but rather can be socially efficient. Through simplifying and specializing asset pools, asset partitioning lowers the cost of monitoring the firm’s assets and thus the cost of credit. To illustrate the asset partitioning role of agency law, I unearth two doctrines ignored by scholarship—the “veil piercing” doctrines of agency. Understanding agency’s asset partitioning role has extensive implications for theory and practice. In addition to providing a unifying account of agency law, the analysis resolves current disputes in the interpretation of its doctrine. Most importantly, recognizing the essential roles of agency demonstrates its ongoing significance to commercial and corporate law.

Compensation for Abused Foreign Domestic Workers: A Problem of Enforcement

In Tay Wee Kiat v Public Prosecutor [2018] 5 SLR 438; [2019] 5 SLR 1033, two offenders who had abused a foreign domestic worker had been ordered to pay her compensation, on pain of a default term of imprisonment. When they failed to pay, the Prosecution applied for the compensation order to be enforced by way of attachment of the offenders’ property or garnishment of debts due to the offenders (“garnishment/attachment orders”). The High Court refused to make garnishment/attachment orders on the grounds that (a) the Prosecution had applied for such orders belatedly; and (b) such orders would lead to “undue protraction” of proceedings. This note argues that the High Court erred in so refusing. Compared to relying on default imprisonment terms as the means of enforcing compensation orders, making garnishment/attachment orders would better comport with the statutory compensation scheme for the High Court, be more economically efficient, and better promote the welfare of abused foreign domestic workers.

Monotonic Estimation for the Survival Probability over a Risk-Rated Portfolio by Discrete-Time Hazard Rate Models

Monotonic estimation for the survival probability of a loan in a risk-rated portfolio is based on the observation arising, for example, from loan pricing that a loan with a lower credit risk rating is more likely to survive than a loan with a higher credit risk rating, given the same additional risk covariates. Two probit-type discrete-time hazard rate models that generate monotonic survival probabilities are proposed in this paper. The first model calculates the discrete-time hazard rate conditional on systematic risk factors. As for the Cox proportion hazard rate model, the model formulates the discrete-time hazard rate by including a baseline component. This baseline component can be estimated outside the model in the absence of model covariates using the long-run average discrete-time hazard rate. This results in a significant reduction in the number of parameters to be otherwise estimated inside the model. The second model is a general form model where loan level factors can be included. Parameter estimation algorithms are also proposed. The models and algorithms proposed in this paper can be used for loan pricing, stress testing, expected credit loss estimation, and modeling of the probability of default term structure.

Default probabilities of privately held firms

Abstract We estimate the term structures of the default probabilities for private firms using data consisting of 1759 default events from 29,894 firms between 1999 and 2014. Each firm’s default likelihood is characterized by a forward intensity model employing macro risk factors and firm-specific attributes. As private firms do not have traded stock prices, we devise a methodology to obtain a public-firm equivalent distance-to-default by projection that references the distance-to-defaults of public firms with comparable attributes. The fitted model provides accurate multi-period forecasts of defaults, leading to both economically and statistically significant benefits over benchmark models. The reported interest rates charged to private firms are reflective of the estimated default term structure.

Wealth and Imprisonment: A Critical Analysis on Inmates Under the Imprisonment Terms for Default Payment of Fine in Sri Lanka with Special Reference to Kegalle and Kuruwita Prisons

This research mainly focused on the inmates under imprisonment terms for default payments of fine. This study aims to find the rationale behind the default terms and how these terms are affected to the non -wealth inmates. Generally, this research based on direct interviews with defaulters under the imprisonment terms. Prison officials and a limited sample of lawyers were directly interviewed and collected their personnel experience and suggestions with regard to defaulters. The literature review was employed throughout the research to collect a wide spread knowledge in relation to defaulter population and this review allowed to collect the various resources in to one arena. This work identified that there are plenty of reasons for the imprisonment for default payment of fine besides of low income level of the offenders. The research focuses the domestic laws and international laws relating to imprisonment for default payment of fine. The purpose of this research is gather qualitative information in relation to those prisoners who are inability to pay their fine. This qualitative information will help in the formulation of recommendation when default terms are imposed, by identifying the measures most likely to be of assistance in ensuring payment of the fines and the measures which might prevent the imprisonment of persons for non-payment of fines due to poor income level.

Systemic risk and dynamics of contagion: a duplex inter-bank network

This paper constructs a duplex banking network formed by credit relationships and information interaction via the banks’ balance sheet to model the structure of systemic risk and investigate the dynamic mechanism of contagion in terms of default and liquidity infection along with the factors that affect the extent of the contagion. We systematically explain the role that duplex banking networks play in different aspects of risk contagion. Through theoretical analysis and simulations, we conclude that asymmetric information interaction would increase the inflexibility of the system, which leads to liquidity shortage and possibly the collapse of the whole market. The weakness of systemic risk in the interior of the complex banking system can be characterized by the partial discount factor using illiquid assets in the information network. By improving the connectedness of the information network of the duplex networks, the spread of contagion can be partially slowed.

Forward ordinal probability models for point-in-time probability of default term structure: methodologies and implementations for IFRS 9 expected credit loss estimation and CCAR stress testing

Forward ordinal probability models for point-in-time probability of default term structure: methodologies and implementations for IFRS 9 expected credit loss estimation and CCAR stress testing