The Effects of the Bank-Internal Ratings on the Loan Maturity | Zendy

Nataliya Fedorenko | Zendy; Oleksandr Talavera | Zendy; Dorothea Schaefer | Zendy

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The Effects of the Bank-Internal Ratings on the Loan Maturity

Author(s) -

Nataliya Fedorenko,

Oleksandr Talavera,

Dorothea Schaefer

Publication year - 2007

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.967267

Subject(s) - maturity (psychological) , loan , business , financial system , actuarial science , accounting , psychology , finance , developmental psychology

The paper focuses on the eects of three dierent internal bank ratings - Risk, Prop- erty and Creditworthiness Ratings - for loan maturity. We use a sample of about 5,000 loans given to sole proprietors and corporate borrowers by two German banks from January 2003 to July 2005. The estimation results for corporate borrowers are consistent with Diamond's (1991, QJE, 3, 106) predictions of a non-monotonic relationship between ratings and maturity. However, our results for sole proprietors dier from the predictions of Diamond and the majority of the empirical literature. We find a negative association between ratings and the maturity of the loans given to sole proprietors.

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