Attention Discrimination under Time Constraints: Evidence from Retail Lending

58 Pages Posted: 15 Jun 2021

See all articles by Bo Huang

Bo Huang

Renmin University of China - School of Finance

Jiacui Li

David Eccles School of Business, University of Utah

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Mingzhu Tai

The University of Hong Kong, Faculty of Business and Economics

Yiyuan Zhou

University of Hong Kong - HKU Business School

Date Written: June 1, 2021

Abstract

Using proprietary loan screening data, we document that loan officers engage in “attention discrimination”: they exert less effort reviewing ex-ante disadvantage applicants, leading to higher rejection rates than otherwise justified by those applicants’ credit quality. Attention discrimination increases with the officers’ time constraints induced by quasi-random workload variations. When officer workload rises from the bottom to the top decile, they devote 70% less time to disadvantaged applicants, and the approval rate for those applicants declines by three-fifths. Our results indicate that attention constraints magnify discrimination, which provides policy implications about how to reduce discrimination in practice.

Keywords: Attention Constraint, Discrimination, Retail Lending

JEL Classification: D83, D91, G21

Suggested Citation

Huang, Bo and Li, Jiacui and Lin, Tse-Chun and Tai, Mingzhu and Zhou, Yiyuan, Attention Discrimination under Time Constraints: Evidence from Retail Lending (June 1, 2021). Available at SSRN: https://ssrn.com/abstract=3865478 or http://dx.doi.org/10.2139/ssrn.3865478

Bo Huang

Renmin University of China - School of Finance

Ming De Main Building
Renmin University of China
Beijing, Beijing 100872
China

Jiacui Li (Contact Author)

David Eccles School of Business, University of Utah ( email )

8123 SFEBB, 1655 Campus Center Dr
Salt Lake City, UT 84112
United States

HOME PAGE: http://https://www.jiacui-li.com/

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Mingzhu Tai

The University of Hong Kong, Faculty of Business and Economics ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Yiyuan Zhou

University of Hong Kong - HKU Business School ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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