Credit risk depends on several factors. Among them, a quite unexplored one relates to how successful are the enforcement actions banks rely on once loans do not perform anymore. In this paper, by using detailed data obtained from the Italian Credit Register, we investigate how long does it take for a bank to get rid of bad loans. In particular, we concentrate on Italian sole-proprietorships to assess whether firm owner’s gender might affect the duration of bad loans.
We find that loans to female firms stay more in bad status compared to male ones. These findings are robust to censoring, alternative specifications of the distribution of bad loan duration and other bank-specific control variables. However, this has not to be necessarily interpreted as evidence supporting the view that female firms are riskier. In fact, we find that, in case loans are written-off, loans to female firms exit later from banks’ balance sheet than those granted to male ones. This is consistent with the view that banks may expect to recover more from female firms and, as consequence, they persist with costly enforcement actions for longer in case they have granted a loan to a female firm.
That is from the conclusions of the paper "Female Entrepreneurs in Trouble: Do Their Bad Loans Last Longer?" by Marcucci & Mistrulli.