Credit Risk Reduction Effect on Small and Medium- Sized Enterprise Finance Through the Use of Bank Account Information

Naoko Nemoto, Naoyuki Yoshino (), Yutaka Okubo, Daimei Inaba and Kentaro Yanagisawa

Working Papers from eSocialSciences

Abstract: This paper verifies the impact of bank account information, such as information on deposits and withdrawals, that is not necessarily fully accounted for in conventional internal ratings and that can affect the accuracy of the default predictions of small and medium-sized enterprises (SMEs). The analysis demonstrates that the accuracy of default predictions improves when a model based on bank account information is used in addition to the default prediction model based on traditional financial information. The analysis also shows that the degree of improvement increases when the size of the company is small. For small companies, the quality of financial data is generally assumed to be low, but the bank account information model can complement the incomplete data. In addition, for small firms, the bank account information model shows better default prediction capability compared to the financial model, which implies the possibility that banks could extend loans even if only the bank account information is available. The correlation coefficients of the financial model and the bank account model are higher than 50% but not very high, suggesting that these models evaluate borrowers from different perspectives.

Keywords: eSS; small and medium-sized enterprise finance; credit risk analysis; big data; bank account information; deposits; withdrawals; conventional; internal ratings; accuracy; default predictions; small and medium-sized enterprises (SMEs). (search for similar items in EconPapers)
Date: 2018-08
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.esocialsciences.org/Download/repecDownl ... AId=12886&fref=repec

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:ess:wpaper:id:12886

Access Statistics for this paper

More papers in Working Papers from eSocialSciences
Bibliographic data for series maintained by Padma Prakash ().