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Non-Performing Loans and Resolving Private Sector Insolvency pp 227–253Cite as

Palgrave Macmillan

Micro-behavioral Characteristics in a Recessionary Environment: Moral Hazard and Strategic Default

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Abstract

Using a unique data set of corporate loans of 13,070 Greek firms for the period 2008–2015 and an identification strategy based on the internal credit ratings of banks, the study provides evidence that one out of six firms with non-performing loans is a strategic defaulter. Furthermore, it investigates potential determinants of firms’ behavior by relating the probability of strategic default to a number of firm characteristics such as size, age, liquidity, profitability and collateral value. Among others, the analysis provides evidence of a positive relationship of strategic default with outstanding debt and economic uncertainty and a negative relationship with the value of collateral. Also, profitability and collateral can be used to distinguish the strategic defaulters from the financially distressed defaulters. Finally, the relationship of strategic default risk with firm size and age has an inverse U-shape, that is, strategic default is more likely among medium-sized firms compared to small and large firms and it is also more likely among middle-aged firms compared to new-founded and established firms.

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Author information

Authors and Affiliations

  1. Bank of Greece, Athens, Greece

    Ioannis Asimakopoulos

  2. University of Piraeus, Bank of Greece, Athens, Greece

    Dimitris Malliaropulos

  3. ALBA Graduate Business School, Athens, Greece

    Panagiotis K. Avramidis & Nickolaos G. Travlos

Authors
  1. Ioannis Asimakopoulos
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  2. Dimitris Malliaropulos
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  3. Panagiotis K. Avramidis
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  4. Nickolaos G. Travlos
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Editor information

Editors and Affiliations

  1. Group Chief Economist Eurobank Ergasias S.A., Athens, Greece

    Platon Monokroussos

  2. Hellenic Bank Association, Counsel to the Board of Directors, Athens, Greece

    Christos Gortsos

Appendix

Appendix

Table 10.1 Annual aggregate descriptive statistics of loan, financial and commercial data
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Table 10.2 Annual aggregated statistics of loan sample data
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Table 10.3 Summary statistics of aggregated loan data by exposure size (2008–2015)
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Table 10.4 Annual summary statistics of default and strategic default rate
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Table 10.5 Summary statistics of default and strategic default rate per sector (NACE rev2 classification)
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Table 10.6 Probit regression model: maximum likelihood estimates of probability of (1) strategic defaulters vs non-defaulters and (2) strategic defaulters vs non-strategic defaulters
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Table 10.7 Average marginal effects for strategic defaulters
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Fig. 10.1
figure 1

Real GDP, unemployment rate and NPL ratios

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Fig. 10.2
figure 2

Marginal effect of firm size on probability of strategic default

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Fig. 10.3
figure 3

Marginal effect of firm age on probability of strategic default

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Asimakopoulos, I., Malliaropulos, D., Avramidis, P.K., Travlos, N.G. (2017). Micro-behavioral Characteristics in a Recessionary Environment: Moral Hazard and Strategic Default. In: Monokroussos, P., Gortsos, C. (eds) Non-Performing Loans and Resolving Private Sector Insolvency. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-50313-4_10

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  • DOI: https://doi.org/10.1007/978-3-319-50313-4_10

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-319-50312-7

  • Online ISBN: 978-3-319-50313-4

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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