Research from University of KwaZulu-Natal Broadens Understanding of Risk Management (Corporate Loan Recovery Rates under Downturn Conditions in a Developing Economy: Evidence from Zimbabwe): Insurance – Risk Management

2022 NOV 07 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Investigators publish new report on risk management. According to news reporting originating from Durban, South Africa, by NewsRx correspondents, research stated, “In this study, we design stepwise ordinary least squares regression models using various amalgamations of firm features, loan characteristics and macroeconomic variables to forecast workout recovery rates for defaulted bank loans for private non-financial corporates under downturn conditions in Zimbabwe.”

The news journalists obtained a quote from the research from University of KwaZulu-Natal: “Our principal aim is to identify and interpret the determinants of recovery rates for private firm defaulted bank loans. For suitability and efficacy purposes, we adopt a unique real-life data set of defaulted bank loans for private non-financial firms pooled from a major anonymous Zimbabwean commercial bank. Our empirical results show that the firm size, the collateral value, the exposure at default, the earnings before interest and tax/total assets ratio, the length of the workout process, the total debt/total assets ratio, the ratio of (current assets-current liabilities)/total assets, the inflation rate, the interest rate and the real gross domestic product growth rate are the significant determinants of RRs for Zimbabwean private non-financial firm bank loans. We reveal that accounting information is useful in examining recovery rates for defaulted bank loans for private corporations under distressed financial and economic conditions.”

According to the news reporters, the research concluded: “Moreover, we discover that the prediction results of recovery rate models are augmented by fusing firm features and loan characteristics with macroeconomic factors.”

For more information on this research see: Corporate Loan Recovery Rates under Downturn Conditions in a Developing Economy: Evidence from Zimbabwe. Risks, 2022,10(198):198. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks10100198.

Our news editors report that additional information may be obtained by contacting Frank Ranganai Matenda, School of Accounting, Economics and Finance, University of KwaZulu-Natal, Westville Campus, University Road, Westville, Private Bag X54001, Durban 4000, South Africa. Additional authors for this research include Mabutho Sibanda, Eriyoti Chikodza, Victor Gumbo.

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