Numeracy and the Quality of On-the-Job Decisions: Evidence from Loan Officers
67 Pages Posted: 13 Jul 2017 Last revised: 9 Nov 2017
Date Written: November 1, 2017
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: Suggested Citation