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Properties of Accounting and Finance Information and Their Effects on the Performance of Bankers and Models in Predicting Company Failure

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  • David Gadenne
  • Errol R. Iselin

Abstract

When the number of cues provided to a banker for a decision is increased it may (1) increase their information load (number of relevant cues), (2) increase their data load (number of irrelevant cues), and (3) reduce their uncertainty. Models, on the other hand, are not affected by information or data load. The results from this research show that as the number of cues provided to bankers increases, uncertainty reduces, data load increases, but information load is unaffected. The uncertainty reduction increases the decision accuracy of both the bankers and models. Due to the data load experienced by the bankers but not the models, the models have superior performance. The implications for future practice and research are discussed.

Suggested Citation

  • David Gadenne & Errol R. Iselin, 2000. "Properties of Accounting and Finance Information and Their Effects on the Performance of Bankers and Models in Predicting Company Failure," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(1‐2), pages 155-193, January.
    • Handle: RePEc:bla:jbfnac:v:27:y:2000:i:1-2:p:155-193
    DOI: 10.1111/1468-5957.00309
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    Citations

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    Cited by:

    1. Philémon Rakotonjanahary, 2002. "Caracteristiques De L'Information, Surcharge D'Informations Et Qualite De La Decision," Post-Print halshs-00584525, HAL.
    2. Divesh Sharma & Errol Iselin, 2003. "The decision usefulness of reported cash flow and accrual information in a behavioural field experiment," Accounting and Business Research, Taylor & Francis Journals, vol. 33(2), pages 123-135.
    3. Stefano Filomeni & Udichibarna Bose & Anastasios Megaritis & Athanasios Triantafyllou, 2024. "Can market information outperform hard and soft information in predicting corporate defaults?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3567-3592, July.
    4. Divesh S. Sharma & Errol R. Iselin, 2003. "The Relative Relevance of Cash Flow and Accrual Information for Solvency Assessments: A Multi‐Method Approach," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(7‐8), pages 1115-1140, September.
    5. Josep Mª Argilés-Bosch & Josep García-Blandón & Diego Ravenda & Maika M. Valencia-Silva & Antonio D. Somoza, 2017. "The influence of the trade-off between profitability and future increases in sales on cost stickiness," Estudios de Economia, University of Chile, Department of Economics, vol. 44(1 Year 20), pages 81-104, June.

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