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Numeracy and the Quality of On-the-Job Decisions: Evidence from Loan Officers

66 Pages Posted: 13 Jul 2017  

Martin Brown

University of St. Gallen - Swiss Institute of Banking and Finance

Karolin Kirschenmann

ZEW Center for European Economic Research

Thomas Spycher

University of St. Gallen - School of Finance

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Date Written: July 1, 2017

Abstract

We examine how the numeracy level of employees influences the quality of their on-the-job decisions. Based on an administrative dataset of a retail bank we relate the performance of loan officers in a standardized math test to the accuracy of their credit assessments of small business borrowers. We find that loan officers with a high level of numeracy are more accurate in assessing the credit risk of borrowers. The effect is most pronounced during the pre-crisis credit boom period when it is arguably more difficult to pick out risky borrowers.

Keywords: Behavioral Banking, Numeracy, Loan Officers, Screening

JEL Classification: G21, J24

Suggested Citation

Brown, Martin and Kirschenmann, Karolin and Spycher, Thomas, Numeracy and the Quality of On-the-Job Decisions: Evidence from Loan Officers (July 1, 2017). University of St. Gallen, School of Finance Research Paper No. 2017/11. Available at SSRN: https://ssrn.com/abstract=2999687

Martin Brown (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, CH-9000
Switzerland

Karolin Kirschenmann

ZEW Center for European Economic Research ( email )

Germany
+496211235351 (Phone)

Thomas Spycher

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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