War Exposure and Loan Default: Evidence from Kosovo
Regina Opaleva  1@  , Adalbert Winkler  1@  
1 : Frankfurt School of Finance and Management

This paper examines the influence of borrower exposure to war atrocities on loan default probability in post-war Kosovo from 2003 to 2011. We do so based on a sample of 172,108 loans granted by a commercial development-oriented bank. We find that a higher degree of war exposure is associated with a higher probability of loan default. However, this effect is largely driven by repayment behavior during the global financial crisis in 2009/2010. Thus, our results lend support to the view that initially most people having been exposed to traumatic events show a high degree of resilience. However when facing renewed adverse conditions resilience evaporates leading to a belated impact of the war trauma experience triggering repayment behavior that is significantly different compared to the behavior of people with a low degree of war exposure.

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