Loan officer Incentives and the Limits of Hard Information

Tobias Berg, Manju Puri and Jorg Rocholl

No 19051, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Poor loan quality is often attributed to loan officers exercising poor judgment. A potential solution is to base loans on hard information alone. However, we find other consequences of bypassing discretion stemming from loan officer incentives and limits of hard information verifiability. Using unique data where loans are based on hard information, and loan officers are volume-incentivized, we find loan officers increasingly use multiple trials to move loans over the cut-off, both in a regression-discontinuity design and when the cut-off changes. Additional trials positively predict default suggesting strategic manipulation of information even when loans are based on hard information alone.

JEL-codes: G01 G2 G21 G3 (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-ban and nep-cta
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.nber.org/papers/w19051.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:19051

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19051

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().