Amsterdam TI Finance Research Seminars

Speaker(s)
Itzhak Ben David (Ohio State University, United States)
Date
Wednesday, 17 September 2014
Location
Amsterdam

We study a controlled corporate experiment in which loan officers were compensated to engage in loan prospecting in addition to the traditional loan screening. Loan prospecting led to larger loan sizes (+15%) and higher origination rates (+31%) while keeping the traditional credit quality threshold and interest rate intact. Loan officers attempt to influence the decision making process: loan officers report better opinions for loans with moderate approval probability based on their fundamentals. Furthermore, approval decisions rely heavier on loan officers’ opinions, especially for more established loan officers.