Discussion of The Effect of Aggregating Accounting Reports on the Quality of the Lending Decision: An Empirical Investigation

Abstract

This is an interesting and unique study of the effect of financial statement aggregation on bank loan officer decision making. The question of statement detail in loan evaluation has been discussed by credit men for many years. Banks, particularly large banks, generally obtain detailed financial information for credit evaluation purposes and train personnel to use disaggregated statements. Bank officers may be considered as experts in the use of financial statements and representative of those most likely to benefit from disaggregated statements. The results of this study do not necessarily imply that disaggregated statements should be widely distributed, in my opinion. Contrary to the author's conclusions, the results suggest that the disaggregated statements are of little, if any, more value than aggregated statements to the experts. Clearly, the results are not decisive, and they are subject to different interpretations, depending upon your priors. Although the meaning of "aggregation" is of obvious importance, the author provides only an ambiguous definition. The best glimpse that we see is "Several classes of financial data were delineated along these lines and aggregation was not admissible between these classes. These classes were: current assets, fixed assets, long-term investments, other assets, current liabilities, contractual long-term liabilities, noncontractual longterm liabilities (e.g., deferred taxes), owner's equity, revenues, costs, and taxes" (p. 108). Although the greatest differences in value are found between aggregated and partly disaggregated statements, rather than between aggregated and completely disaggregated forms, the middle level