IDEAS home Printed from https://ideas.repec.org/a/wly/agribz/v1y1985i4p285-292.html
   My bibliography  Save this article

A linear programming alternative to discriminant analysis in credit scoring

Author

Listed:
  • William E. Hardy

    (Professors in the Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama)

  • John L. Adrian

    (Professors in the Department of Agricultural Economics and Rural Sociology, Auburn University, Auburn, Alabama)

Abstract

The typical technique used to construct credit scoring models is discriminant analysis. This paper presents a descriptive example and empirical analysis to illustrate how linear programming might be used to solve discriminant type problems. Results of the analysis indicated that the linear programming procedure performs well in solving the example credit scoring problem. In addition, the structure of the linear programming model was such that changes could be readily made to reflect either conservative or liberal lending policies.

Suggested Citation

  • William E. Hardy & John L. Adrian, 1985. "A linear programming alternative to discriminant analysis in credit scoring," Agribusiness, John Wiley & Sons, Ltd., vol. 1(4), pages 285-292.
    • Handle: RePEc:wly:agribz:v:1:y:1985:i:4:p:285-292
    DOI: 10.1002/1520-6297(198524)1:4<285::AID-AGR2720010406>3.0.CO;2-M
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Johnson, R. Bruce & Hagan, Albert R., 1973. "Agricultural Loan Evaluation with Discriminant Analysis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 5(2), pages 57-62, December.
    2. Hardy, William E. & Weed, Johno B., 1980. "Objective Evaluation for Agricultural Lending," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 12(1), pages 159-164, July.
    3. Hardy, William E., Jr. & Weed, Johno B., 1980. "Objective Evaluation For Agricultural Lending," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 12(1), pages 1-6, July.
    4. Johnson, R. Bruce & Hagan, Albert R., 1973. "Agricultural Loan Evaluation With Discriminant Analysis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 5(2), pages 1-6, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Novak, Michael P. & LaDue, Eddy L., 1999. "Application Of Recursive Partitioning To Agricultural Credit Scoring," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(1), pages 1-14, April.
    2. Novak, Michael P. & LaDue, Eddy L., 1997. "Introducing Recursive Partitioning To Agricultural Credit Scoring," Working Papers 127878, Cornell University, Department of Applied Economics and Management.
    3. Thomas, Lyn C., 2000. "A survey of credit and behavioural scoring: forecasting financial risk of lending to consumers," International Journal of Forecasting, Elsevier, vol. 16(2), pages 149-172.
    4. TOBBACK, Ellen & MARTENS, David, 2017. "Retail credit scoring using fine-grained payment data," Working Papers 2017011, University of Antwerp, Faculty of Business and Economics.
    5. Okumu Argan Wekesa & Mwalili Samuel & Mwita Peter, 2012. "Modelling Credit Risk for Personal Loans Using Product-Limit Estimator," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(1), pages 22-32, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Novak, Michael P. & LaDue, Eddy L., 1999. "Application Of Recursive Partitioning To Agricultural Credit Scoring," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(1), pages 1-14, April.
    2. Novak, Michael P. & LaDue, Eddy L., 1997. "Introducing Recursive Partitioning To Agricultural Credit Scoring," Working Papers 127878, Cornell University, Department of Applied Economics and Management.
    3. Buffier, B.D. & Metternick-Jones, M.A., 1995. "Income Equalisation Deposits: Enhancing Farm Viability," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 63(01), pages 1-9, April.
    4. Sanjay J. Bhayani & Butalal Ajmera, 2011. "A Study on Performance Evaluation of Dinesh Mills Ltd," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 2(6), pages 114-123, September.
    5. de Jager, Fritz & Swanepoel, Vernon, 1994. "Factors Associated With Farm Financial Failure In The Northern Springbok Flats," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 33(4), December.
    6. Gustafson, Cole R. & Crane, Laurence M. & Fischer, William R., 1995. "Agronomic, Economic, and Demographic Characteristics of Crop Farms in the Great Plains and Corn Belt," Agricultural Economics Reports 23221, North Dakota State University, Department of Agribusiness and Applied Economics.
    7. Mattia Iotti & Giuseppe Bonazzi, 2018. "Analysis of the Risk of Bankruptcy of Tomato Processing Companies Operating in the Inter-Regional Interprofessional Organization “OI Pomodoro da Industria Nord Italia”," Sustainability, MDPI, vol. 10(4), pages 1-23, March.
    8. Hardy, William E., Jr. & Spurlock, Stanley R. & Parrish, Donnie R. & Benoist, Lee A., 1987. "An Analysis Of Factors That Affect The Quality Of Federal Land Bank Loans," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(2), pages 1-8, December.
    9. Mário Santiago Céu & Raquel Medeiros Gaspar, 2022. "Vegetative cycle and bankruptcy predictors of agricultural firms," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 68(12), pages 445-454.
    10. Babetskaya, Lyubov, 2001. "Enhancing The Performance Of Risk-Rating Models At Community Banks," 2001 Annual meeting, August 5-8, Chicago, IL 20690, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Pederson, Glenn D. & Rao, Ananth & Boehlje, Michael, 1990. "Analysis Of Loan Settlements And Restructured Loan Performance," Staff Papers 13257, University of Minnesota, Department of Applied Economics.
    12. Barry, Peter J. & Ellinger, Paul N., 1989. "Credit Scoring, Loan Pricing, And Farm Business Performance," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-11, July.
    13. Iotti, Mattia, 2023. "Financial evaluation and credit access of agricultural firms," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 25(2), October.
    14. Murray, Steven W., 1978. "An Analysis Of Rates Of Change In Community Per Capita Income By Discriminant Analysis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 10(1), pages 1-4, July.
    15. Boratyńska, Katarzyna & Grzegorzewska, Emilia, 2018. "Bankruptcy prediction in the agribusiness sector: Lessons from quantitative and qualitative approaches," Journal of Business Research, Elsevier, vol. 89(C), pages 175-181.
    16. Hardy, William E., Jr. & Weed, Johno B., 1980. "Objective Evaluation For Agricultural Lending," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 12(1), pages 1-6, July.
    17. Paul N. Ellinger & Nate S. Splett & Peter J. Barry, 1992. "Consistency of credit evaluations at agricultural banks," Agribusiness, John Wiley & Sons, Ltd., vol. 8(6), pages 517-536.
    18. Otima, Ruth M. A., 1994. "Predicting loan repayment performance: a case of Kenyan farm borrowers," ISU General Staff Papers 1994010108000018175, Iowa State University, Department of Economics.
    19. Josep M. Argilés, 1998. "Accounting information and the prediction of farm viability," Economics Working Papers 277, Department of Economics and Business, Universitat Pompeu Fabra.
    20. Pederson, Glenn D. & Duncan, Douglas G., 1983. "Performance Pricing of Farm Loans Under Risk: Methods and Implementation," Agricultural Economics Reports 23410, North Dakota State University, Department of Agribusiness and Applied Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:1:y:1985:i:4:p:285-292. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.