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Quantitative vs. Qualitative Criteria for Credit Risk Assessment

João O. Soares, Joaquim P. Pina, Manuel S. Ribeiro, Margarida Catalão-Lopes ()
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João O. Soares, Joaquim P. Pina, Manuel S. Ribeiro, Margarida Catalão-Lopes: Technical University of Lisbon, Portugal

Authors registered in the RePEc Author Service: Joaquim Pires Pina () and Margarida Catalão-Lopes ()

Frontiers in Finance and Economics, 2011, vol. 8, issue 1, 69-87

Abstract: 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.

Keywords: banking; credit risk; qualitative criteria; multi-criteria decision analysis. (search for similar items in EconPapers)
JEL-codes: C12 C22 C44 G21 G32 (search for similar items in EconPapers)
Date: 2011
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