Default risk drivers in shipping bank loans

This paper proposes a credit scoring model for the empirical assessment of default risk drivers of shipping bank loans. A unique dataset, consisting of the credit portfolio of a ship lending bank is used to estimate a logit model with two-way clustered adjusted standard errors, ensuring robust inferences. Industry specific variables, captured through current and expected conditions in the extremely volatile global shipping freight markets, the risk appetite of borrowers-the shipowners - expressed through the chartering policy they follow - and a pricing variable, are shown for the first time to be the important factors explaining default probabilities of bank loans. (C) 2016 Elsevier Ltd. All rights reserved.