What's in a Face?An Experiment on Facial Information and Loan Approval Decision

59 Pages Posted: 19 Jul 2021

See all articles by Yu-Jane Liu

Yu-Jane Liu

Peking University - Guanghua School of Management

Zeyang Chen

Peking University - Department of Applied Economics

Juanjuan Meng

Peking University - Guanghua School of Management

Zeng Wang

affiliation not provided to SSRN

Date Written: July 17, 2021

Abstract

Face-to-face communication is essential in daily life but relatively little is known about whether seeing a face improves people’s decision quality. This experimental paper studies the loan approval decisions based on the historical cash loan data with real repayment outcomes, and exogenously varies whether and how a borrower’s facial information is provided. We find that facial information does not improve subjects’ decisions, despite the fact that it can predict repayment behavior in a machine learning algorithm. This is because subjects have various biases in evaluating facial photos; and they rely excessively on facial information in making the loan approval decisions.

Keywords: facial information, cash loan, repayment behavior, machine learning

JEL Classification: D80, D91, G41

Suggested Citation

Liu, Yu-Jane and Chen, Zeyang and Meng, Juanjuan and Wang, Zeng, What's in a Face?An Experiment on Facial Information and Loan Approval Decision (July 17, 2021). Available at SSRN: https://ssrn.com/abstract=3888544 or http://dx.doi.org/10.2139/ssrn.3888544

Yu-Jane Liu

Peking University - Guanghua School of Management ( email )

Beijing
China

Zeyang Chen

Peking University - Department of Applied Economics ( email )

Beijing, 100871
China

Juanjuan Meng (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

HOME PAGE: http://www.gsm.pku.edu.cn/faculty_and_research/en/en_teacherDetail.html?crmurl=http://crm.gsm.pku.ed

Zeng Wang

affiliation not provided to SSRN

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