TY  - BOOK
AU  - Cole,Shawn
AU  - Cole,Shawn
AU  - Kanz,Martin
AU  - Klapper,Leora
TI  - Incentivizing Calculated Risk-Taking: Evidence from an Experiment with Commercial Bank Loan Officers 
PY  - 2012///
CY  - Washington, D.C.
PB  - The World Bank
KW  - Access to Finance
KW  - Banking
KW  - Bankruptcy and Resolution of Financial Distress
KW  - Banks & Banking Reform
KW  - Debt Markets
KW  - Emerging markets
KW  - Finance and Financial Sector Development
KW  - Loan officer incentives
KW  - Microfinance
KW  - Private Sector Development
N2  - This paper uses a series of experiments with commercial bank loan officers to test the effect of performance incentives on risk-assessment and lending decisions. The paper first shows that, while high-powered incentives lead to greater screening effort and more profitable lending, their power is muted by both deferred compensation and the limited liability typically enjoyed by loan officers. Second, the paper presents direct evidence that incentive contracts distort judgment and beliefs, even among trained professionals with many years of experience. Loans evaluated under more permissive incentive schemes are rated significantly less risky than the same loans evaluated under pay-for-performance
UR  - http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6146
ER  -