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The Incentive Effect of Scores: Randomized Evidence from Credit Committees / Daniel Paravisini, Antoinette Schoar.
- Format:
- Book
- Author/Creator:
- Paravisini, Daniel.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19303.
- NBER working paper series no. w19303
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Incentive Effect of Scores
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- We design a randomized controlled trial to evaluate the adoption of credit scoring with a bank that uses soft information in small businesses lending. We find that credit scores improve the productivity of credit committees, reduce managerial involvement in the loan approval process, and increase the profitability of lending. Credit committee members' effort and output also increase when they anticipate the score becoming available, indicating that scores improve incentives to use existing information. Our results imply that credit scores improve the efficiency and decentralize decision-making in loan production, which has implications for the optimal organization of banks.
- Notes:
- Print version record
- August 2013.
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