Credit Concession through credit scoring: Analysis and application proposal

Résumé 0

"Purpose: The study herein develops and tests a credit scoring model which can help financial institutions in assessing credit requests. Design/methodology: The empirical study has the objective of answering two questions: (1) Which ratios better discriminate the companies based on their being solvent or insolvent? and (2) What is the relative importance of these ratios? To do this, several statistical techniques with a multifactorial focus have been used (Multivariate Analysis of Variance, Linear Discriminant Analysis, Logit and Probit Models). Several samples of companies have been used in order to obtain and to test the model. Findings: Through the application of several statistical techniques, the credit scoring model has been proved to be effective in discriminating between good and bad creditors. Research limitations/implications: This study focuses on manufacturing, commercial and services companies of all sizes in Spain; Therefore, the conclusions may differ for other geographical locations."