Management of the Cutoff for Granting Consumer Credit

Hugo Crespi Júnior, Luiz Carlos Jacob Perera and Roberto Borges Kerr

RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), 2017, vol. 21, issue 2, 269-285

Abstract: Credit issued directly to consumers is processed in volume through credit-scoring computer models that analyze a large number of potential clients in order to eliminate those that have poor payment histories. This avoids financial losses that arise from payment default. However, by refusing consumers who might default based on purely financial criteria, these models also refuse a large number of consumers with potentially good payment behavior, which can also reduce retailers' potential gains. The main objective of this paper is to verify whether corporate earnings can improve by considering the operating margin when defining the cutoff for direct lending to consumers. We used a statistical measure known as the Receiver Operating Characteristic (ROC) curve and the approach offered by Stein (2005) to build simulations around real market values, which allowed us to confirm that by being flexible and taking into account the operating margin, companies may improve net earnings.

Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://rac.anpad.org.br/index.php/rac/article/view/1215/1211 (text/html)
https://rac.anpad.org.br/index.php/rac/article/download/1215/1211 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:abg:anprac:v:21:y:2017:i:2:1215

Access Statistics for this article

RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration) is currently edited by Marcelo de Souza Bispo

More articles in RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration) from ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração
Bibliographic data for series maintained by Information Technology of ANPAD ().