Financial incentives and loan officer behavior: multitasking and allocation of effort under an incomplete contract
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Data
2015
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Resumo
We investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial bank, we examine the three main activities that loan officers perform: monitoring, origination, and screening. We find that when loan officers are at risk of losing their bonus, they increase monitoring and origination, but not screening effort. On the other hand, having lost a bonus in the previous period does not entail higher effort. We document unintended consequences of the incentive contract showing the incompleteness of such contracts.
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Evento: Annual Meeting of the Financial Managemente Association