Modelling Lenders' Assessments of the Ability of Corporate Borrowers to Repay

Lenders use financial statements to assess the ability of corporate borrowers to repay loans in the normal course of business. By some criteria, such as a frequency count of the number of financial analyses performed for different purposes, this may be the most important use of external financial reports. This study provides a brief description of the use of accounting and other information for this purpose, and reports an experiment which provides insight on whether loan officers use a linear‐additive or configural strategy when making the final judgement of ability to repay. Results also provide evidence of the extent of consensus between loan officers, the effect of individual and institutional differences, and the degree of insight by loan officers into their own cognitive processes.