The 2008 global financial meltdown caused by improper evaluation presents lenders a difficult decision in identifying significant explanatory variables for default when extending credit. A large percentage of firms defaulted on their credit obligations due to inherent operational factors. The purpose of this research was to explore the relationship between credit risk or default risk and industry type by evaluating both operational and economic factors of sampled industries. The study provides evidence that some industries are more likely to default in their credit obligations than others. The research design involved a random selection of 10 industries, and each industry is represented by 10 selected companies that fit defined parameters in order to explore their operational ratios and default. Data were collected from the financial statements of 100 companies, 10 from each industry for a period of 15 years with charge-offs (percentage of commercial net loans charged off as losses) as the dependent variable and monetary shock, earnings before interest rates and taxes/total assets, current assets/current liabilities, and net income available to common stockholders/common equity as the independent variables. Multiple regressions were carried out on each of the 10 industry types. The results show that the ratios calculated from the financial statements are indicators for default in five of the ten industries. A relationship was established in the wireless communication industry, drug related products industry, electronic stores industry, asset management industry, and gas utilities industry in terms of default and the independent variables as hypothesized. Social change implications of this research include better understanding of credit risk management in the commercial lending industry, which should facilitate more economic stability.
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