THE IMPACT OF ACCOUNTING INFORMATION ON LENDING DECISION OF COMMERCIAL BANKS IN NIGERIA
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ABSTRACT
Most banks operating in Nigeria today are finding an increasing number of loans in their portfolios that have gone sour. The reasons for this undesirable situation vary as a result of bad loan decision at inception, deterioration later on or simply the effects of the economy. However, literature in the field of accounting has shown that accounting information is helpful in decision making not only in all spheres of business but also at all levels of management. This study, therefore investigates the impact of accounting information on lending decision in Nigerian commercial banks. To this end, two hypotheses were developed and tested at 5% level of significance using the nonparametric chi-square test. Then data used in the tests of the hypotheses were derived mostly through the administration of structured questionnaire to the 25 commercial banks that fall within the sample frame. These data supplemented by personal interviews with the respondents, were used to support the analysis to arrive major findings. Interviews with lending officers were held with a view to: Seeking practical insight into lending in commercial banks which only such interviews could provide: Gather information for refining lending principles and techniques in an effort to make them more applicable in commercial banks. Examine current practices as an aid in judging the relevance of accounting information that were thought to be applicable in banking lending. Following a detailed analysis of the responses to the questionnaire, the major findings of this study are summarized as follows: Accounting information is a necessary ingredient in bank lending decision. Accounting ratios enriches the decision making ability of lending officers, by providing them with pertinent information. The lending policy of Nigeria commercial banks revolve around the minimization of load defaults and the maximization of profit. Finally, other important areas for further research were suggested.
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