FINANCIAL STATEMENT ANALYSIS AS A BANK LENDING DECISION
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ABSTRACT
Commercial banks perform numerous functions. One of the most profitable investments of the commercial banks is granting of loans and advances to those customers that need such including business organization as loans are always needed to enhance profitability of such organization and help them execute such projects, which their capital cannot finance. These are factors, which banks do consider before granting such loans. The research work is geared toward finding out the role which financial accounting information plays in lending decision making of the banks using First Bank of Nigeria PLc Okpara Avenue Branch, Enugu state as case study. The study specifically was aimed at determining the extent to which the financial accounting information presented by prospective borrowers influence lending decisions; determine whether the banks always demand for financial statements from their customers while making decisions; ascertain the extent to which adequate use of accounting information reduce bad debts; ascertain the extent to which improve accounting records by borrowers have contributed to non-repayment of loans; find out the extent to which poor financial positions of prospective borrowers has led to non-approval of loan and then make recommendation that will lead to efficiency in bank lending decisions. The study adopted the survey research design and randomly enrolled participants in the study. A total of 30 responses were validated from the enrolled participants where all respondent are active staffs of First Bank branch in Okpara Avenue, Enugu State. The findings of this study revealed that banks always demand for financial statement from their customers while making lending decision. Also, the financial accounting information presented by prospective borrowers has influence lending decisions in a very high extent. Also, adequate use of accounting information has to an extent reduce incidence of bad debts. The study therefore recommends that both commercial and none commercial banks should develop or acquire technological systems which would be more effective in keeping and generating financial information of a given entity and also aid the verification of such account to help determine the eligibility status of such an entity before loans are granted. This will save the bank from the risk of bad debts and other forms of risk that many arise as a result of money lending.
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