Estimation of default probabilities using incomplete contracts data

Why Do Firms Use Fixed-Term Contracts? *Temporary forms of employment account for a variable but never trivial share of total employment in both the U.S. and in Europe. In this article we look at how one specific form of temporary employment − employment with fixed-term contracts − fits into employers' hiring policies. We find that human capital variables (schooling, skills and employer-provided training) as measured at the levels of the worker and the workplace are important determinants of the employers' decisions to hire with fixed-term contracts and to promote temporary workers to permanent positions. Those employers that hire more with fixed-term contracts are also those that are more likely to offer a permanent position to their newly-hired temporary employees. Our results indicate that fixed-term contracts are used as mechanisms for screening workers for permanent positions.

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Variable reduction, sample selection bias and bank retail credit scoring

Marshall

Tang

Milne³

2010

Journal of Empirical Finance

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This paper investigates the effect of including the customer loan approval process to the estimation of loan performance and explores the influence of sample selection bias in predicting the probability of default. The bootstrap variable reduction technique is applied to reduce the variable dimension for a large dataset drawn from a major UK retail bank. The results show a statistically significant correlation between the loan approval and performance processes. We further demonstrate an economically significant improvement in forecasting performance when taking into account sample selection bias. We conclude that financial institutions can obtain benefits by correcting for sample selection bias in their credit scoring models

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Estimation of default probabilities using incomplete contracts data

Cited by 9 publications

References 15 publications

Hurdle models of repayment behaviour in personal loan contracts

Hurdle models of repayment behaviour in personal loan contracts

Why do firms use fixed-term contracts?

Variable reduction, sample selection bias and bank retail credit scoring

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