Key Variables and Characteristics of Loan Loss Given Default: Empirical Evidence from 28 Provinces in China

This article empirically investigates the impact of key variables and characteristics on loan loss given default (LGD) of small farmers using data from 28 provinces in China. The default feature of loans is not only a financial issue and a risk management issue but also an exploration of the loan customers' default rule. In this study, the key variables were selected using an F-test to identify which ones are critical in credit risk management. Then, we use a t-test to obtain the significant characteristics with an impact on LGD. We found that the 30-35-year-old age group, those living in houses with shared ownership, households with two to four workers, and those whose ratio of annual net income to GDP per capita is between 10 and 20 tend to have higher LGD. These results inform bank lenders and policymakers of the most significant factors that influence loan loss default.