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雷达卡
Along with the likelihood of default, recovery upon default is a key ingredient of creditrisk
models. We document the empirical determinants of the recovery on defaulted securities
in the United States over the period 1982–1999, using the prices of defaulted securities at
the time of default and at the time of emergence from default or from bankruptcy. In addition
to seniority and security of the defaulted securities, industry conditions at the time of
default are found to be robust and important determinants of the recovery rates: Recovery
in a distressed state of the industry (median annual stock return for the industry firms being
less than −30%) is lower than the recovery in a healthy state of the industry by 10 to 20
cents on a dollar; a better liquidity position of the peers of the defaulted firm also implies
higher recovery at emergence; recovery is negatively correlated with asset-specificity of the
industry when the industry is in distress, but not otherwise; finally, recovery is not a ected
by macroeconomic and aggregate bond-market supply conditions, once the industry distress
e ect is accounted for. Our results underscore the existence of substantial variability in
recoveries, in the cross-section of securities as well as in the time-series, and suggest that in
order to capture recovery risk, the next generation of credit risk models should include an
industry factor in addition to the factor representing the firm value or the default process.
Keywords: Recovery, Loss given default, Credit risk, Default, Bankruptcy.
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