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The Effects of Task Size and Similarity on the Decision Behavior of Bank Loan Officers

Author

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  • Stanley F. Biggs

    (School of Business Administration, University of Connecticut, Storrs, Connecticut 06268)

  • Jean C. Bedard

    (School of Business Administration, University of Connecticut, Storrs, Connecticut 06268)

  • Brian G. Gaber

    (School of Business, University of Waterloo, Waterloo, Ontario, Canada)

  • Thomas J. Linsmeier

    (College of Business Administration, University of Iowa, Iowa City, Iowa 52242)

Abstract

Research on decision-making behavior has shown that decision strategies used by individuals are contingent upon the characteristics of the task. For example, as the task size (i.e., the number of alternatives and/or the number of dimensions describing each alternative) increases, individuals tend to quickly eliminate alternatives that do not meet a criterion level for any dimension (i.e., they adopt a noncompensatory decision strategy, in which a high value on one dimension cannot offset or compensate for a low value on another dimension). Most of this research has involved consumers making buying decisions. The purpose of the research reported here was to determine if contingent decision behavior extends to experts (experienced bank loan officers) making business decisions (loan decisions). In this study two task characteristics (task size, and similarity of loan profiles describing alternatives) were varied in a bank loan decision context. Two process tracing methods (information boards and think-aloud verbal protocol analysis) were used to obtain evidence of how eleven bank loan officers made choices among alternative loan candidates. Of particular interest was the effect that changes in task characteristics had on loan officers' decision strategies. The results indicated that when faced with tasks of increasing size, loan officers adapted their behavior in a manner consistent with an increased use of noncompensatory decision strategies. In contrast, when the loan profiles of candidate companies were similar loan officers exhibited an increased use of compensatory strategies. It was also found that when both the task size and similarity of alternatives were varied loan officers adapted their behavior as if they processed these characteristics serially. These results indicate that contingent behavior associated with the two types of task characteristics may be quite different. A priori, there was reason to believe that expert loan officers would not exhibit contingent decision behavior. The fact that their decision strategies were contingent upon task characteristics has important implications for managerial practice and research. First, the results have design implications for information and decision support systems for lending institutions. Second, future research should investigate the consequences of serial processing of task characteristics.

Suggested Citation

  • Stanley F. Biggs & Jean C. Bedard & Brian G. Gaber & Thomas J. Linsmeier, 1985. "The Effects of Task Size and Similarity on the Decision Behavior of Bank Loan Officers," Management Science, INFORMS, vol. 31(8), pages 970-987, August.
    • Handle: RePEc:inm:ormnsc:v:31:y:1985:i:8:p:970-987
    DOI: 10.1287/mnsc.31.8.970
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    Citations

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    Cited by:

    1. Buschena, David E., 1994. "The Effects Of Similarity On Choice And Decision Effort," 1994 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses Risk, Technical Committee Meeting, March 24-26, 1994, Gulf Shores State Park, Alabama 271557, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    2. Belton, Ian & Wright, George & Sissons, Aileen & Bolger, Fergus & Crawford, Megan M. & Hamlin, Iain & Taylor Browne Lūka, Courtney & Vasilichi, Alexandrina, 2021. "Delphi with feedback of rationales: How large can a Delphi group be such that participants are not overloaded, de-motivated, or disengaged?," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    3. Schneider, Arnold, 2018. "Studies on the impact of accounting information and assurance on commercial lending judgments," Journal of Accounting Literature, Elsevier, vol. 41(C), pages 63-74.
    4. Andrea Bellucci & Alexander Borisov & Alberto Zazzaro, 2011. "Do Male and Female Loan Officers Differ in Small Business Lending? A Review of the Literature," Contributions to Economics, in: Giorgio Calcagnini & Ilario Favaretto (ed.), The Economics of Small Businesses, chapter 0, pages 195-219, Springer.
    5. Lee, Hanjoon & Herr, Paul M. & Kardes, Frank R. & Kim, Chankon, 1999. "Motivated Search: Effects of Choice Accountability, Issue Involvement, and Prior Knowledge on Information Acquisition and Use," Journal of Business Research, Elsevier, vol. 45(1), pages 75-88, May.
    6. Brenčič, Vera, 2014. "Search online: Evidence from acquisition of information on online job boards and resume banks," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 112-125.
    7. Stone, Dan N. & Kadous, Kathryn, 1997. "The Joint Effects of Task-Related Negative Affect and Task Difficulty in Multiattribute Choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 70(2), pages 159-174, May.
    8. Jella Pfeiffer & Michael Scholz, 2013. "A Low-Effort Recommendation System with High Accuracy," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 5(6), pages 397-408, December.
    9. Anja Dieckmann & Katrin Dippold & Holger Dietrich, 2009. "Compensatory versus noncompensatory models for predicting consumer preferences," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 4(3), pages 200-213, April.
    10. Peter Todd & Izak Benbasat, 1999. "Evaluating the Impact of DSS, Cognitive Effort, and Incentives on Strategy Selection," Information Systems Research, INFORMS, vol. 10(4), pages 356-374, December.
    11. Tyszka, Tadeusz, 1998. "Two Pairs of Conflicting Motives in Decision Making," Organizational Behavior and Human Decision Processes, Elsevier, vol. 74(3), pages 189-211, June.
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    13. Rosman, Andrew J. & Bedard, Jean C., 1999. "Lenders' Decision Strategies and Loan Structure Decisions," Journal of Business Research, Elsevier, vol. 46(1), pages 83-94, September.
    14. Chu, P. C. & Spires, Eric E., 2001. "Does Time Constraint on Users Negate the Efficacy of Decision Support Systems?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 85(2), pages 226-249, July.
    15. Williams, Michael L. & Dennis, Alan R. & Stam, Antonie & Aronson, Jay E., 2007. "The impact of DSS use and information load on errors and decision quality," European Journal of Operational Research, Elsevier, vol. 176(1), pages 468-481, January.
    16. repec:cup:judgdm:v:4:y:2009:i:3:p:200-213 is not listed on IDEAS
    17. Jeffrey Stibel & Itiel Dror & Talia Ben-Zeev, 2009. "The Collapsing Choice Theory: Dissociating Choice and Judgment in Decision Making," Theory and Decision, Springer, vol. 66(2), pages 149-179, February.
    18. Gensch, Dennis H. & Soofi, Ehsan S., 1995. "An information-theoretic two-stage, two-decision rule, choice model," European Journal of Operational Research, Elsevier, vol. 81(2), pages 271-280, March.
    19. Trönnberg, Carl-Christian & Hemlin, Sven, 2014. "Lending decision making in banks: A critical incident study of loan officers," European Management Journal, Elsevier, vol. 32(2), pages 362-372.
    20. Libby, Robert & Bloomfield, Robert & Nelson, Mark W., 2002. "Experimental research in financial accounting," Accounting, Organizations and Society, Elsevier, vol. 27(8), pages 775-810, November.
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