Jul 2026· IMF Working Papers· Vol 2026, pp. 1· 0 citations
Abstract
We provide new evidence on the de facto seniority structure of sovereign debt. Using a measure of the Relative Percentage in Default (RPID) by creditor group for 119 low-income and emerging market countries over the period 1980–2022, we show that debt owed to the IMF and the World Bank is, on average, the most senior, followed by debt owed to official bilateral creditors. Private creditors, notably bondholders and commercial banks, are on average junior to official creditors, with commercial banks being the least prioritized group for repayments. Beyond characterizing the seniority hierarchy, our empirical analysis shows that creditor composition has economically meaningful implications for sovereign risk. Using an instrumental variable estimation, we show that IMF credit outstanding as a share of GNI is robustly and negatively associated with the probability of a debt crisis. This stabilizing effect weakens progressively as debt stocks rise, suggesting that the IMF's crisis-preventing role diminishes in situations of severe debt overhang. Turning to sovereign borrowing costs, we find that IMF lending is negatively associated with sovereign bond spreads.
We collect data on ranges of hypothetical asset liquidation values disclosed in U.S. Bankruptcy Court filings. We use this historical information to construct a firm-specific measure, “RecRisk,” which captures asset recovery risk through the uncertainty surrounding asset valuations in liquidation events. We document that higher RecRisk is associated with smaller syndicated loan amounts as a percentage of available collateral, more and tighter performance covenants, and increased loan spreads for borrowers with high credit risk. High RecRisk borrowers also experience lower secondary loan market prices and reduced liquidity for loans with high credit risk. When borrowers become financially distressed, high RecRisk is further associated with declining loan prices and reduced ownership by Collateralized Loan Obligations, the dominant investors in the leveraged loan market. Overall, our results indicate that loan contract terms and prices reflect recovery risk faced by lenders.
Data Availability: Data are available from the sources cited in the text. The authors can provide the RecRisk measure at the firm-year level upon request.
JEL Classifications: M41; G32; G34; G12; G21; G33.
Aleksander A. Aleszczyk, F. Vasvari, Dushyantkumar Vyas· Accounting Review· 0 citations
This study aims to examine the impact of public debt composition by creditor type on financial stability in Tanzania, using quarterly data and an autoregressive distributed lag (ARDL) model. Specifically, the analysis focuses on the roles of debt held by the central bank, commercial banks, pension funds and external creditors, with financial stability proxied by the capital adequacy ratio.
Using an ARDL model, this study examines the long-run and short-run effects of public debt held by the central bank, commercial banks, pension funds and external creditors, while controlling for key macroeconomic variables such as GDP growth, inflation, interest rates and foreign exchange reserves.
The results reveal that the identity of the creditor plays a critical role. In the long run, debt held by commercial banks is positively associated with financial stability. In contrast, debt held by external creditors and the central bank is linked to increased financial vulnerability. Pension fund holdings show no significant effect. Short-term findings suggest that sudden increases in commercial bank debt and declines in foreign reserves temporarily compromise financial stability.
These results underscore the significance of public debt size and its holders, providing crucial insights for designing debt management strategies that foster macrofinancial resilience in Tanzania.
Enock Mwakalila, Seif Muba· Journal of Financial Economi...· 0 citations
This study examines whether the accumulated stock of private credit provides early-warning information for subsequent deterioration in banking-sector asset quality. It combines annual Passport banking indicators with World Development Indicators for 58 countries over 2010–2024; the preferred sample contains 746 country–year observations. A second-order dynamic fixed-effects model links log(1 + NPL), where NPL denotes the non-performing loan ratio, to lagged private credit to gross domestic product (GDP), real credit growth, lending rates, bank capital, GDP growth, inflation, and unemployment. Its preferred credit-depth coefficient is 0.00377, implying that a 10-percentage-point increase is associated with approximately 0.15 percentage points more NPLs one year later at the sample median. To operationalize early-warning calibration without claiming a universal cutoff, the paper reports the sample credit-depth quartiles and estimates a country fixed-effects linear probability model using the European Banking Authority’s 5% gross-NPL supervisory trigger. In that alternative outcome, a 10-percentage-point increase in credit depth is associated with a 2.78-percentage-point higher conditional probability of NPLs reaching 5% or more (p = 0.002). On a strictly common 609-observation sample, the credit-depth coefficients at one-, two-, and three-year horizons are 0.00501, 0.00960, and 0.01266. Lending rates and unemployment are positive, whereas annual credit growth and capital ratios are not robust predictors. Pooled interactions do not reject equal slopes across broad country partitions. System generalized method of moments (GMM) passes conventional tests but violates a persistence-bound credibility check. The evidence supports an early-warning interpretation, not a causal claim.
Marco Antonio Ledesma Munive, Alejandro Anibal Aguirre-Rojas, Graciela Soledad Verastegui Velasquez et al.· Journal of Risk and Financia...· 0 citations
This research investigates how liquidity creation induces moral hazard behavior and affects credit quality in Indonesian commercial banks. This study examines the effect of liquidity creation, liquidity risk, and central bank policies on credit risk in Indonesian commercial banks, proxied by the non-performing loan (NPL) ratio. Using panel data from 46 banks listed on the Indonesia Stock Exchange over 2015–2024, we apply the Two-Step System Generalized Method of Moments (SYS-GMM) to address endogeneity inherent in dynamic panel models. Results indicate that liquidity creation has a significant positive effect on NPL, consistent with the moral hazard hypothesis. Liquidity risk (LDR) also significantly and positively affects NPL. Reserve requirements (GWM) and BI-Rate do not produce a direct and significant effect on NPL. Return on assets (ROA) significantly and negatively affects NPL. These results suggest that credit risk in Indonesian commercial banking is predominantly influenced by bank-level intermediation behavior rather than by macroeconomic or policy variables. The research concludes that excess liquidity conditions incentivize aggressive credit expansion without proportionate attention to borrower quality, particularly in an oligopolistic market structure with implicit state guarantees.
Jeffry Fauzan, Dewi Hanggraeni· Eduvest - Journal Of Univers...· 0 citations
This study examines the impact of Total Bad Debts (TBD) on the performance of deposit money
banks in Nigeria. Total bad debts, which represent unrecoverable loans, remain a critical indicator
of credit risk and a major challenge to bank profitability and financial stability. The study adopts
a longitudinal research design using secondary data obtained from the financial statements of
eight (8) selected deposit money banks in Nigeria over a nine-year period spanning 2014–2022.
The analysis employs the Panel Autoregressive Distributed Lag (ARDL) model to evaluate the
relationship between total bad debts and bank performance, measured by Return on Equity (ROE).
Findings from the descriptive statistics reveal that banks experienced relatively low and unstable
profitability alongside high levels of bad debts during the study period, indicating significant
exposure to credit risk. The regression results show that total bad debts have a negative and
statistically significant effect on bank performance, with a coefficient of -18.66743 and a p-value
of 0.0014. This implies that an increase in total bad debts leads to a substantial decline in return
on equity. Although the correlation analysis indicates a weak positive association between TBD
and ROE (0.03546), further analysis confirms a significant inverse relationship, suggesting that
rising bad debts ultimately reduce profitability. The study concludes that total bad debts
significantly and negatively affect the performance of deposit money banks in Nigeria. It
recommends that banks strengthen credit appraisal and monitoring systems, adopt effective loan
recovery strategies, and implement robust credit risk management practices to minimize bad debts
and enhance financial performance.
S. Gurowa· International Journal of Eco...· 0 citations
China has emerged as the world's largest bilateral creditor to developing countries, yet its effects on sovereign debt outcomes remain contested. Competing theoretical perspectives predict opposing effects: Chinese lending may increase debt vulnerability through opacity, moral hazard, and unsustainable obligations, or reduce it by providing critical financing to countries excluded from traditional capital markets. This study assesses the relationship between Chinese lending and sovereign debt distress using panel data on 152 developing countries from 2000 to 2022. Employing a within‐between Mundlak decomposition and an instrumental variable strategy, we find little evidence that Chinese lending increases debt distress within countries over time. China's loans may actually decrease the risk of debt crises. We find no consistent evidence that Chinese lending increases debt restructuring or IMF funds access. We also find no evidence that Chinese loans increase overall debt burdens, affect countries' ability to service obligations, or lead to riskier fiscal behavior. Our findings suggest that rather than focusing on blame attribution, research should prioritize developing institutional mechanisms to coordinate creditors in managing debt distress in an increasingly fragmented global financial landscape.
Patrick E. Shea· Economics & Politics· 0 citations