Tests of Theories of Information Processing Behavior in Credit Judgment .

Abstract ABSTRACT: Previous accounting research in applied judgment tasks has been interpreted as supportive of the linear model as an appropriate representation of information processing behavior in the decision tasks studied. The present research tests whether this theoretical conclusion applies to the credit judgment task. Subjects judged the creditworthiness of hypothetical business borrowers described by one or more of the following traits: quality of management, financial condition, and payment record. Two distinctly different analytical techniques were employed to test the predictive ability of the linear model and several nonlinear models. In addition to standard correlational tests, qualitative tests of the predictions of the models were also made. Correlational tests were supportive of the linear model. However, qualitative tests diagnosed the credit judgment task as involving nonlinear decision-making processes. Theoretical and methodological implications are discussed.