Integrating credit models using accounting information with loan officers' decision processes

Article Abstract:

This paper focuses on loan officers' cognitive processes of problem detection and problem-hypothesis formulation, which are incorporated into a credit model when they are confronted with loan decisions. Prior credit models in banking have not directly addressed loan officers' internal processes in a loan situation. The integration of both loan officers' cognitive processes and information used in a credit model can better help explain their decision-making biases. The results presented in this paper showed that information derived from a credit model influences loan officers' problem detection and problem-hypothesis formulation, and these processes are important factors in their loan approval. To identify loan officers' decision-making processes, the approach used in this paper integrates principles from financial management, economics, and cognitive psychology with methodological developments from psychometrics and econometrics. (Reprinted by permission of the publisher.)

Models, Banking industry, Management, Credit, Loan officers

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Explaining intraperiod accounting choices: the reporting of currency translation gains and losses

Article Abstract:

Prior to the introduction of an Australian Accounting Standard relating to the treatment of foreign currency items, we find agreement among firms on the method of translating foreign subsidiaries' assets and liabilities, but not such agreement on the method of reporting the resulting gain or loss. The reporting choice represents an intraperiod accounting decision. We show that this choice is a function of the demand for ex ante optimal risk sharing agreements between management and shareholders, although auditor identity and firm size are also found to influence the choice of reporting methods. We model the policy choice as both a dichotomous and a more finely graded three-way problem, introducing to the accounting literature an experimental technique designed to test for the existence of any mutual dependence between alternatives. (Reprinted by permission of the publisher.)

Standards, Australia, Accounting and auditing, International business enterprises, Multinational corporations, Foreign exchange, Foreign exchange market

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The role of componential and integrative knowledge in accounting education

Article Abstract:

This study examines the role of componential knowledge, i.e., generally accepted accounting principles, and integrative knowledge, i.e, performing LIFO and FIFO inventory analysis, in solving complex accounting problems. This study predicts a dynamic, interactive process among componential, integrative knowledge and problem solution. Accounting students were given training in inventory methods, and then they were given inventory problems. The results support the prediction that there is a dynamic, interactive process between componential knowledge, integrative knowledge, and problem solving. The results provide several useful new directions for accounting pedagogy research and practice. (Reprinted by permission of the publisher.)

Study and teaching, Inventory control

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