Does Borrower’s Personality Affects the Repayment of the Loan? A Study of Banking Sector of Pakistan

Shahzadah Fahed Qureshi, Rashid Ahmad and Muhammad Saim Hashmi

Journal of Accounting and Finance in Emerging Economies, 2020, vol. 6, issue 1, 107-116

Abstract: The continuing global increase in economic activities is increasing the importance of the banking sector as the hub of such activities. The banking sector issue loans to individuals, firms, and government. Various factors influence the repayment of these loans. In this study, we argue that the personality of the borrower affects the repayment of the loan. We have selected a sample of 500 borrowers of five major banks in Pakistan by using a cluster sampling technique. We selected 250 (50%) regular borrower and 250 (50%) defaulters. We measured borrower personality through a 44-items big five inventory (BFI) questionnaire similar to John Srivastava (1999). We analyzed data using one-way ANOVA and regression. The results show considerable significant differences between the personality of regular borrowers and defaulters on all five traits of personality, which reveals that the borrower’s personality affects the repayment of the loan. The defaulters were high on extroversion and neuroticism dimensions, while regular borrowers were high on agreeableness, conscientiousness, and openness to experience. The results also depict the strong effect of demographic characteristics such as income, education, and family size on loan repayment. The study suggests banks consider the personality traits of the borrower at the time of issuing of loan.

Keywords: Loan Repayment; Personality Traits; Regular Borrower; Defaulter (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publishing.globalcsrc.org/ojs/index.php/jafee/article/view/1053/732 (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:src:jafeec:v:6:y:2020:i:1:p:107-116

DOI: 10.26710/jafee.v6i1.1053

Access Statistics for this article

More articles in Journal of Accounting and Finance in Emerging Economies from CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan Contact information at EDIRC.
Bibliographic data for series maintained by Rabia Rasheed ().