Credit risk assessment: a comparison of the performances of the linear discriminant analysis and the logistic regression

Aldo Levy and Riad Baha

International Journal of Entrepreneurship and Small Business, 2021, vol. 42, issue 1/2, 169-186

Abstract: The prediction of credit risk and borrowers solvency has been widely discussed in the financial and accounting literature whatever the international financial accounting standards (Levy et al., 2016). Various methods are used to build prediction models and can be adapted according to the country, the sector of activity and the nature of the data used. These methods have shown their effectiveness compared to traditional financial analysis for companies classification. This paper aims to compare the classification performances of the logistic regression (LR) model with those of the linear discriminant analysis (LDA) one on a SMEs sample belonging to the Algerian private sector.

Keywords: credit risk; solvency of borrowers; SMEs failure; performances; classification; linear discriminant analysis; LDA; logistic regression. (search for similar items in EconPapers)
Date: 2021
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