Fear, Anger and Credit. On Bank Robberies and Loan Conditions

Abstract

We study the impact of emotions on real-world decisions made by loan officers by analyzing the loan conditions of loans granted immediately after a bank branch robbery. We find significant differences between the conditions of loans granted after a robbery and changes in loan conditions that occur contemporaneously at unaffected branches. In general, loan officers seem to adopt so-called avoidance behavior. In accordance with the literature on posttraumatic stress, their avoidance behavior is halved within two weeks following the robbery and the effect further varies depending on the presence, or absence, of a firearm during the robbery.

Keywords: behavioural finance, bank robberies, transactional versus relationship lending

JEL Classification: G02, G2