Abstract

This study aimed to identify how credit decisions are made based on the accounting information available in the audited financial statements, where it was applied to a sample of seven commercial banks operating in Najran (Saudi Arabia). These banks are the major institutions that attract investment in the southern region of Saudi Arabia. In order to achieve the objectives of this study and answer its questions, the researcher designed a questionnaire to collect the data from 50 employees representing the general managers, directors of credit departments, managers of risk departments, managers of internal audit departments, and compliance officials in addition to some employees in those departments in these selected banks. The analysis of data was done applying SPSS program. The findings showed that there are several factors affect the credit decision-making. The most significant ones are: the personal knowledge and the reputation of the borrower by the bank manager, the reputation of the chartered accountant who audited the financial statement. In the light of the findings, the study proposed a number of recommendations. First, the need to increase attention to the financial statements' analysis and the use of analysis indicators in the financial risk assessment of credit decisions, by enhancing the skills of credit and risk management staff through continuous training and related qualifications and also through the recruitment based on competence and ability to use financial tools. Second, the need to shift from the philosophy of credit policy based on personal knowledge to a professional method relying on accounting information as a basis for rationalizing credit policy. Finally, there is a need to increase the degree of credit decisions authorization to bank branches.