NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Loan officer Incentives and the Limits of Hard Information

Tobias Berg, Manju Puri, Jorg Rocholl

NBER Working Paper No. 19051
Issued in May 2013
NBER Program(s):   CF

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.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19051

Users who downloaded this paper also downloaded these:
Einav and Levin w19035 The Data Revolution and Economic Analysis
Farmer and Khramov w19457 Solving and Estimating Indeterminate DSGE Models
Woodford w19368 Macroeconomic Analysis without the Rational Expectations Hypothesis
Leeper and Zhou w19686 Inflation's Role in Optimal Monetary-Fiscal Policy
Hagedorn, Karahan, Manovskii, and Mitman w19499 Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us