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Article
Publication date: 9 January 2017

Laura Cristina Lanzarini, Augusto Villa Monte, Aurelio F. Bariviera and Patricia Jimbo Santana

One of the key elements in the banking industry relies on the appropriate selection of customers. To manage credit risk, banks dedicate special efforts to classify customers…

382

Abstract

Purpose

One of the key elements in the banking industry relies on the appropriate selection of customers. To manage credit risk, banks dedicate special efforts to classify customers according to their risk. The usual decision-making process consists of gathering personal and financial information about the borrower. Processing this information can be time-consuming, and presents some difficulties because of the heterogeneous structure of data.

Design/methodology/approach

This paper presents an alternative method that is able to generate rules that work not only on numerical attributes but also on nominal ones. The key feature of this method, called learning vector quantization and particle swarm optimization (LVQ + PSO), is the finding of a reduced set of classifying rules. This is possible because of the combination of a competitive neural network with an optimization technique.

Findings

These rules constitute a predictive model for credit risk approval. The reduced quantity of rules makes this method useful for credit officers aiming to make decisions about granting a credit. It also could act as an orientation for borrower’s self evaluation about her/his creditworthiness.

Research limitations/implications

In spite of the fact that conducted tests showed no evidence of dependence between results and the initial size of the LVQ network, it is considered desirable to repeat the measurements using an LVQ network of minimum size and a version of variable population PSO to adequately explore the solution space in the future.

Practical implications

In the past decades, there has been an increase in consumer credit. Retail banking is a growing industry. Not only has there been a boom in credit card memberships, specially in emerging economies, but also an increase in small consumption credits. For example, it is very common in emerging economies that families buy home appliances on installments. In those countries, the association of a home appliance shop with a financial institution is usual, to provide customers with quick-decision credit line facilities. The existence of such a financial instrument aids to boost sales. This association generates conflict of interests. On one hand, the home appliance shop wants to sell products to all customers. Therefore, it is in its best interest to promote a generous credit policy. On the other hand, the financial institution wants to maximize the revenue from credits, leading to a strict surveillance of loan losses. Having a fair and transparent credit-granting policy favors a good business relationship between home appliances shops and financial institutions. One way of developing such a policy is to construct objective rules to decide to grant or deny a credit application.

Social implications

Better credit decision rules generate enhanced risk sharing. In addition, it improves transparency in credit acceptance decisions, giving less room to arbitrary decisions.

Originality/value

This study develops a new method that combines a competitive neural network and an optimization technique. It was applied to a real database of a financial institution in a developing country.

Details

Kybernetes, vol. 46 no. 1
Type: Research Article
ISSN: 0368-492X

Keywords

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Article
Publication date: 9 January 2017

José M. Merigó, Salvador Linares-Mustarós and Joan Carles Ferrer-Comalat

626

Abstract

Details

Kybernetes, vol. 46 no. 1
Type: Research Article
ISSN: 0368-492X

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Article
Publication date: 1 February 2004

Giuseppe Galassi and Richard Mattessich

The paper offers a survey of major Italian accounting scholars and their work for the period from 1900 to 1950. Apart from the late works of Rossi and Besta, the main focus is on…

202

Abstract

The paper offers a survey of major Italian accounting scholars and their work for the period from 1900 to 1950. Apart from the late works of Rossi and Besta, the main focus is on the contributions by Zappa, who undoubtedly dominated the scene. In this period, as well as later, most Italian accountants and “aziendalisti” adopted the so‐called “income system”. Although its premises originated with Fabio Besta, master of the so‐called “patrimonial or proprietorship system”, the Italian School under Zappa gave this system a new theoretical basis that differed fundamentally from that of Besta. Zappa also developed the dynamic aspect of accounting and business economics that still prevails in Italy. The paper also devotes attention to other Italian scholars, less well‐known abroad. In the area of cost accounting it concentrates on the views of De Minico and his disciple Amodeo, but also mentions other contributors. The final Section deals with Italian contributions to accounting history during this period

Details

Review of Accounting and Finance, vol. 3 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 1 February 2018

Rita Fabbri, Laura Gabrielli and Aurora Greta Ruggeri

The purpose of this paper is to examine the cross-sectoral collaboration between conservation and economic appraisal, and to process a financial analysis for private owners of a…

184

Abstract

Purpose

The purpose of this paper is to examine the cross-sectoral collaboration between conservation and economic appraisal, and to process a financial analysis for private owners of a built heritage.

Design/methodology/approach

The methodology applied addresses the financial analysis of restoration through a discounted cash flow analysis, together with a life cycle costing. Costs and revenues are both analysed in this paper. Some energy-saving measures are applied to cut running costs and decrease the energy required by the building, using as reference the “Guidelines for improving energy efficiency in cultural heritage” drafted by MiBACT, which considers the respect of restoration principles. In order to increase revenues, part of the building is rented. The attractiveness of the investment opportunity is valued through the calculation of the net present value of cash flows, the payback period and the internal rate of return.

Findings

The paper offers a simple strategy for the planning of cost-revenues, preventively allowing verification if the conservation is economically feasible and if the owners can afford the operation. The strategic planning will give the owners the chance of maintaining the property of their building and achieve a proper restoration on it.

Originality/value

The novelty of the paper is the study of cooperation between conservation and economic valuation, but also the focus on a specific portion of twentieth-century heritage, the war-wounded houses, which represent a widespread patrimony, on which it is not clear how to operate yet.

Details

Journal of Cultural Heritage Management and Sustainable Development, vol. 8 no. 2
Type: Research Article
ISSN: 2044-1266

Keywords

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Article
Publication date: 4 October 2022

Samra Chaudary, Sohail Zafar and Thomas Li-Ping Tang

Following behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money attitudes/avaricious…

596

Abstract

Purpose

Following behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money attitudes/avaricious financial aspirations) as a lens to frame critical concerns (short-term and long-term investment decisions) in the immediate-proximal (current income) and distal-omnibus (future inheritance) contexts to maximize expected utility and ultimate serenity across context, people and time.

Design/methodology/approach

The authors collected data from 277 active equity traders (professional money managers and individual investors) in Pakistan’s two most robust investment hubs—Karachi and Lahore. The authors measured their love-of-money attitude (avaricious monetary aspirations), short-term and long-term investment decisions and demographic variables and collected data during Pakistan's bear markets (Pakistan Stock Exchange, PSX-100).

Findings

Investors’ love of money relates to short-term and long-term decisions. However, these relationships are significant for money managers but non-significant for individual investors. Further, investors’ current income moderates this relationship for short-term investment decisions but not long-term decisions. The intensity of the aspirations-to-short-term investment relationship is much higher for investors with low-income levels than those with average and high-income levels. Future inheritance moderates the relationships between aspirations and short-term and long-term decisions. Regardless of their love-of-money orientations, investors with future inheritance have higher magnitudes of short-term and long-term investments than those without future inheritance. The intensity of the aspirations-to-investments relationship is more potent for investors without future inheritance than those with inheritance. Investors with low avaricious monetary aspirations and without inheritance expectations show the lowest short-term and long-term investment decisions. Investors' current income and future inheritance moderate the relationships between their love of money attitude and short-term and long-term decisions differently in Pakistan's bear markets.

Practical implications

The authors help investors make financial decisions and help financial institutions, asset management companies, brokerage houses and investment banks identify marketing strategies and investor segmentation and provide individualized services.

Originality/value

Professional money managers have a stronger short-term orientation than individual investors. Lack of wealth (current income and future inheritance) motivates greedy investors to take more risks and become more vulnerable than non-greedy ones—investors’ financial resources and wealth matter. The Matthew Effect in investment decisions exists in Pakistan’s emerging economy.

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