The Influencing Factors behind Zero Recovery and Non-zero Recovery of Non-performing Loans

Abstract

Abstract:

Dealing with non-performing assets is not only an important daily work for financial institutions, but also the only way for the government and financial institutions to survive from financial distresses. Based on Loss Metrics database with respect to the non-performing loans which have U shaped asymmetric Beta distribution for loss given default, we study the influencing factors of zero recovery rate and non-zero recovery rate. We construct a discrimination model for zero-recovery rate and the regression model for non-zero recovery rate, in order to identify the influencing factors and estimate their contributions to models. The results indicate that there are a lot of differences in factors and contributions between the two models. The important factors of discrimination model include five-level classification of loans, whether the debtors are in a business standstill or not and whether the region of debtors is economically backward or not. The important factors of regression model include region, operating conditions, the size of loans and methods for loan transferring. The results not only reveal the laws behind the recovery of non-performing loans, but also improve the efficiency of dealing with non-performing loans.

Key words: non-performing loans, influencing factors, zero-recovery rate, non-zero recovery rate, rapid disposal

Chen Muzi, Liu Xiaofang, Yang Xiaoguang. The Influencing Factors behind Zero Recovery and Non-zero Recovery of Non-performing Loans[J]. , 2015, 27(12): 27-38.

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