Abstract

http://ssrn.com/abstract=2046696
 
 

References (25)



 


 



Loan Prospecting and the Loss of Soft Information


Sumit Agarwal


Georgetown University - Department of Finance

Itzhak Ben-David


Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

April 28, 2016

Fisher College of Business Working Paper No. 2012-03-07
Charles A. Dice Center Working Paper No. 2012-7

Abstract:     
We study a controlled experiment in which bank’s loan officers were incentivized to prospect for new applications. The dollar volume of approved loans increased; however, we find that loan officers did not source new applications and that the expected default rate did not change. Instead, the bank relied on favorable hard information when approving loans and ignored unfavorable soft information. Furthermore, loan officers convinced approved applicants to borrow larger amounts. Both factors contributed to an ex post higher default rate and to the loss of the predictive power of the bank’s credit default model.

Number of Pages in PDF File: 50

Keywords: loan officers, loan prospecting, information production, credit default model

JEL Classification: G01, G21


Open PDF in Browser Download This Paper

Date posted: April 26, 2012 ; Last revised: April 29, 2016

Suggested Citation

Agarwal, Sumit and Ben-David, Itzhak, Loan Prospecting and the Loss of Soft Information (April 28, 2016). Fisher College of Business Working Paper No. 2012-03-07; Charles A. Dice Center Working Paper No. 2012-7. Available at SSRN: http://ssrn.com/abstract=2046696 or http://dx.doi.org/10.2139/ssrn.2046696

Contact Information

Sumit Agarwal
Georgetown University - Department of Finance ( email )
3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (Phone)
HOME PAGE: http://www.ushakrisna.com

Itzhak Ben-David (Contact Author)
Ohio State University - Fisher College of Business, Finance Department ( email )
2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/
Feedback to SSRN


Paper statistics
Abstract Views: 1,943
Downloads: 290
Download Rank: 77,443
References:  25

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.234 seconds