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Quantitative vs. Qualitative Criteria for Credit Risk Assessment

  • João O. Soares, Joaquim P. Pina, Manuel S. Ribeiro, Margarida Catalão-Lopes

    ()

    (Technical University of Lisbon, Portugal)

The existing vast literature on credit risk assessment and default prediction provides models building mostly in quantitative indicators. We present the results of a survey carried out of experts from the main banks in Portugal, conveying evidence on the dominant procedures undertaken by the Portuguese banking system. Our analysis concludes on the relevance of qualitative criteria, particularly management’s experience and reliability, and on their significant negative correlation with banks’ default records. Within this context the paper reflects on the role of multi-criteria decision analysis (MCDA) models as a way to process credit risk assessment integrating qualitative and quantitative aspects.

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Article provided by SKEMA Business School in its journal Frontiers in Finance and Economics.

Volume (Year): 8 (2011)
Issue (Month): 1 (April)
Pages: 69-87

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Handle: RePEc:ffe:journl:v:8:y:2011:i:1:p:69-87
Contact details of provider: Web page: http://www.ffe.esc-lille.com

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