Title: Credit-scoring and bank lending policy in consumer loans

Authors: Maria Ganopoulou; Fotini Giapoutzi; Kyriaki Kosmidou; Theodoros Moysiadis

Addresses: School of Economics and Business Administration, International Hellenic University, 14th km Thessaloniki, Nea Moudania, Thermi, 57001 Thessaloniki, Greece ' School of Economics and Business Administration, International Hellenic University, 14th km Thessaloniki, Nea Moudania, Thermi, 57001 Thessaloniki, Greece ' Department of Economics, Division of Business Administration, Aristotle University of Thessaloniki, 54124 Thessaloniki, Greece ' Faculty of Sciences, School of Mathematics, Aristotle University of Thessaloniki, University Campus, 54124 Thessaloniki, Greece

Abstract: The objective of this paper is to estimate a credit-scoring model for the consumer loans during the period 2007-2009. A probit model per year is estimated to examine, whether the probability of granting a loan changes through years. Moreover through a bivariate probit model, we analysed how the borrower's characteristics influence the decision of granting consumer loans and their performance. Eventually, we demonstrated that the financial institutions' lending policies are compatible with default risk minimisation and thus it is important for banks to review the borrowers' creditworthiness periodically, in order to minimise default risk.

Keywords: credit scoring; bivariate probit; financial distress; bank lending policy; consumer loans; default risk; creditworthiness.

DOI: 10.1504/IJFERM.2013.053703

International Journal of Financial Engineering and Risk Management, 2013 Vol.1 No.1, pp.90 - 110

Available online: 04 May 2013 *

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