Abstract:
This study aims to ascertain the perceptions of bankers in Sri Lanka of the different
default predictor information and the prediction performances. In semi-structured
interviews, twenty-three credit risk and corporate banking managers from 26 banks in
Sri Lanka were surveyed on their perceptions towards the application of accounting,
share market and corporate governance information in corporate default prediction.
The study follows mixed research design and uses semi-structured interviews to collect
information of default prediction. Thematic analysis and t-tests were used to analyse
the data. All the previous studies on corporate default prediction adopted quantitative
methods to examine the role of different predictor information. This study contributes
to the literature on redefining and realigning the corporate default prediction models
with empirical quantitative findings. The results indicate that bankers in Sri Lanka
have a generally positive perception of accounting information. They perceive
governance information as being critical for credit decisions. However, no decisions
are made using governance information. The majority of the bankers voiced negative
perceptions about applying market information to their default prediction models.
Further, bankers limit their default prediction models by devaluing or
misunderstanding the role of different predictor information when making corporate
lending decisions.
