Logit Analysis for Profit Maximizing Loan Classification

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Watt, David L. ; Mortensen, Timothy L. ; Leistritz, F. Larry
  • Subject: Financial Economics, | farm, financial, logistic regression, loan delinquency, Farm Management, Financial Economics,

Lending criteria and loan classification methods are developed. Rating system breaking points are analyzed to present a method to maximize loan revenues. Financial characteristics of farmers are used as determinants of delinquency in a multivariate logistic model. Results indicate that debt-to-asset and operating ration are most indicative of default.
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