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Screening soft information: evidence from loan officers

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  • James Wang

Abstract

I evaluate how loan officers screen uncodified, soft information using data from China. After documenting substantial differences in loan decisions and outcomes across loan officers, I develop and estimate a screening model incorporating screening ability and beliefs regarding ability. Estimates imply that the typical loan officer is risk‐averse, has heterogeneous screening ability, and behaves overconfidently—behaving as if he or she observes more from soft information than what the data would indicate. However, I still find that loan officers offer value over benchmarks that ignore soft information. Counterfactuals on compensation, loan assignment, and training further explore the limits of screening.

Suggested Citation

  • James Wang, 2020. "Screening soft information: evidence from loan officers," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 1287-1322, December.
    • Handle: RePEc:bla:randje:v:51:y:2020:i:4:p:1287-1322
    DOI: 10.1111/1756-2171.12357
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