A multi-objective approach for the prediction of loan defaults

Odeh, Oluwarotimi O.; Koduru, Praveen; Featherstone, Allen M.; Sanjoy, Das; Welch, Stephen M.

doi:10.1016/j.eswa.2011.01.096

Cited by 16 publications

(12 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Whether the credit facility is guaranteed or not, fixed assets are a form of security should the firm go under while indebted. (Odeh et al (2011) show that lower owner equity and repayment capacity are default indicators. Enterprises must strive to maintain and grow shareholder value, influencing future funding application outcomes.…”

Section: Discussionmentioning

confidence: 99%

Financial Institution Type and Firm-Related Attributes as Determinants of Loan Amounts

Mallinguh¹,

Zéman²

2022

JRFM

View full text Add to dashboard Cite

Access to formal credit remains critical for business operations, particularly for firms unable to generate sufficient funds internally. Using the World Bank’s Enterprise Survey dataset, 2018, we analyzed 230 Kenyan firms that applied for loans. These loans are sourced from banks (private, commercial, or state-owned) or non-banking financial institutions. Specifically, the paper explores the effect of financial institution type and firm-related characteristics on loan amounts advanced. The results show that the preferred credit provider matters, with the sensitivity level varying among the three institutional types. Additionally, the collateralization value, the owner’s equity proportion of fixed assets, and any existing credit facility correlate positively with the outcome variable. There is an inverse relationship between the largest shareholder’s ownership and the loan amount. The study uses the new product (service) launches to measure innovation. The findings suggest that firms in the innovation process access higher loan amounts than their non-innovative peers. Be that as it may, the difference in amount effect size between the two groups is small based on Cohen’s d rule. The paper highlights the theoretical and practical implications of these findings.

show abstract

Section: Discussionmentioning

confidence: 99%

Financial Institution Type and Firm-Related Attributes as Determinants of Loan Amounts

Mallinguh¹,

Zéman²

2022

JRFM

View full text Add to dashboard Cite

show abstract

“…In addition to the cases mentioned above, clients become locked in with banks through loan and deposit contracts. The problem of volatility in working capital makes it difficult for them to honor debt obligations and leave bleak chances of resilience, that is, initiation of loan repayment process (de Guevara & Maudos, 2011; Odeh et al, 2011). Probst and Raisch (2005) asserted that organizations must strike a balance between the extremes of efficiency and resilience.…”

Section: Introductionmentioning

confidence: 99%

Uncovering Effects of Hot Potatoes in Banking System: Arresting Die-Hard Issues

Abbass

Niazi

Basıt³

et al. 2021

Sage Open

View full text Add to dashboard Cite

This study is aimed to conceptually engineer the effects of hot potatoes (bad loans) in the banking system. The study’s research design uses elementary concepts of graph theory comprising of mappings of systemic behavior of contemporary banking. Issues have been formally underpinned, described, and visualized through directed and linear graphs. Findings of the study show that it is an inherent feature of the banking system to generate hot potatoes and allow them to sit there. It creates heat in the system by way of latency, turgescence, propagation, and concurrent cyclicality. These predicaments of systemic crises of banking deteriorate the sustainability of the system. The pilot study (using classical t-Test) conducted as part of this research has validated the theoretical argument aforementioned. The study provides new insights into these die-hard issues. It helps refine the agenda of future research in banking.

show abstract

“…Other examples of research using performance criteria include Awunyo-Vitor et al (2014), Dodson and Ahrendsen (2018) and Odeh et al (2011), who used sophisticated modelling involving a fuzzy simplex generic algorithm with multi objectives to find that the best indicators of default which involved repayment capacity and the owner’s equity. It might have been thought this is somewhat obvious.…”

Section: Introductionmentioning

confidence: 99%

Farmers’ characteristics’ and the propensity to reduce debt

Greig

Nuthall

Old

2019

AFR

View full text Add to dashboard Cite

Purpose The purpose of this paper is to investigate a farm manager’s personal characteristics (personality, age, education, objectives, experience, etc.) as drivers of debt payback success and rates. Traditionally bankers have used historic business statistics, and equity levels, to assess loans and credit worthiness. It is hypothesised that a managers’ personal characteristics are likely to be a better predictor of future debt payback performance. Design/methodology/approach The literature was searched to isolate the managers’ personal variables likely to determine debt payback. The information led to defining a quantitative model based on the theory of planned behaviour (TPB) which was hypothesised as determining payback rates where a choice was available. A postal random stratified survey of NZ owner operator farm managers provided the data to test the model and define its parameters using regressions, structural equation modelling and statistical comparisons. Findings The modelling results make it clear a manager’s personal characteristics are highly correlated with debt payback and, logically, are very likely to be the drivers. Four random effects equations and a comparison of high- and low-debt payback managers led to this conclusion. Practical implications Bankers should use the managers’ personal characteristics, as defined in the regressions, alongside traditional measures when assessing farm business loan requests. This approach is opposite to the traditional methods using mainly historic data. Originality/value The use of the TPB in assessing debt payback is a new and novel approach showing how enduring personal characteristics can be used in assessing proposals, and particularly, entrepreneurs’ adventurist investments in situations where historic data are not available.

show abstract

A multi-objective approach for the prediction of loan defaults

Cited by 16 publications

References 9 publications

Financial Institution Type and Firm-Related Attributes as Determinants of Loan Amounts

Financial Institution Type and Firm-Related Attributes as Determinants of Loan Amounts

Uncovering Effects of Hot Potatoes in Banking System: Arresting Die-Hard Issues

Farmers’ characteristics’ and the propensity to reduce debt

Contact Info

Product

Resources

About