A Decision Theory Experiment in the Assessment of Financial Distress
Chalos, Jean-Pierre
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https://hdl.handle.net/2142/71369
Description
Title
A Decision Theory Experiment in the Assessment of Financial Distress
Author(s)
Chalos, Jean-Pierre
Issue Date
1982
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, Accounting
Abstract
This experiment extends individual decision theory accounting research to a multi person setting. Specifically, the loan review performance of bank committees is examined using empirically derived cases pertaining to default and non default firms.
Through a repeated measures design, individual and group performance is compared to that of a statistical model. Parameters include the relative likelihood of financial distress, posterior probabilities of loan default, and optimal expected utility action choice. Information utilization is also examined as well as hypothesized social decision schemes.
Analyses indicate that groups are superior to individuals in both judgmental prediction and statistical performance. While also more accurate in default prediction than a discriminant model, groups are outperformed by a Bayesian model of normative statistical judgment.
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