Research
Information Selection in Default Prediction: Sri Lankan Bankers’ Perspectives
Authors:
J. M. R Fernando ,
University of Kelaniya, LK
About J. M. R
Department of Finance, Faculty of Commerce and Management Studies
L. Li,
University of Waikato, NZ
About L.
School of Accounting, Finance and Economics, Waikato Management School
G. Hou
University of Waikato, NZ
About G.
School of Accounting, Finance and Economics, Waikato Management School
Abstract
This study aims to ascertain the perceptions of bankers in Sri Lanka of the different default predictor information and the prediction performances. In semi-structured interviews, twenty-three credit risk and corporate banking managers from 26 banks in Sri Lanka were surveyed on their perceptions towards the application of accounting, share market and corporate governance information in corporate default prediction. The study follows mixed research design and uses semi-structured interviews to collect information of default prediction. Thematic analysis and t-tests were used to analyse the data. All the previous studies on corporate default prediction adopted quantitative methods to examine the role of different predictor information. This study contributes to the literature on redefining and realigning the corporate default prediction models with empirical quantitative findings. The results indicate that bankers in Sri Lanka have a generally positive perception of accounting information. They perceive governance information as being critical for credit decisions. However, no decisions are made using governance information. The majority of the bankers voiced negative perceptions about applying market information to their default prediction models. Further, bankers limit their default prediction models by devaluing or misunderstanding the role of different predictor information when making corporate lending decisions.
How to Cite:
Fernando, J.M.R., Li, L. and Hou, G., 2022. Information Selection in Default Prediction: Sri Lankan Bankers’ Perspectives. International Journal of Accounting and Business Finance, 8(2), pp.106–134. DOI: http://doi.org/10.4038/ijabf.v8i2.127
Published on
31 Dec 2022.
Peer Reviewed
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