Examining Credit Default Risk: an Empirical Study on Consumer Credit Clients
نویسندگان
چکیده
This paper explores the relationship between consumer credit clients’ pay back performance and some demographic and financial variables (age, income, sex, interest rate, loan size and etc.). There are basically six functional associated with credit lending activities of banks in general: (1) assessment of the customers credit risk; (2) making the credit granting decision; (3) collecting debts; (4) monitoring customer behavior and compiling managerial information; (5) bearing the risk of default; (6) financing the debtor. The present study focuses on the fourth activity by obtaining data on credit clients from one of the biggest banks in Turkey and investigating the influence of both financial and demographic characteristics of customers on whether they pay back on time or not. A logistic binary regression is used to evaluate the data. Results show that financial variables rather than the demographic characteristics of clients have a significant influence on customers’ pay back performance. Thus, the longer the maturity time, the higher the interest rate, the higher the risk of credit default. This suggests bankers apply appropriate adjustments to financial variables in order to minimize credit default risk. (JEL: G20 Financial Institutions and Services: General) *Ozlem Ozdemir, Assistant Professor of Economics, Yeditepe University, Kayisdagi Kampusu, Istanbul. www.ozdemirozlem.yahoo.com. Corresponding author. Levent Boran, System Engineer, Kocbank A.S.-Information Technology
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