Fear, Anger, and Credit. On Bank Robberies and Loan Conditions

Abstract

We study the impact of emotions on real‐world decisions made by loan officers by analyzing the loan conditions of loans granted immediately after a bank branch robbery. We find significant differences between the conditions of loans granted after a robbery and changes in loan conditions that occur contemporaneously at unaffected branches. In general, loan officers seem to adopt so‐called avoidance behavior. In accordance with the literature on posttraumatic stress, their avoidance behavior is halved within 2 weeks following the robbery and the effect further varies depending on the presence, or absence, of a firearm during the robbery. (JEL G02, G2)

Numeracy and On‐the‐job Performance: Evidence From Loan Officers

“…Other papers focus on loan officers' characteristics that might explain why certain loan officers perform better within a given organizational and incentive structure. Existing work looks at the influence of loan officers' gender (Beck, Behr, and Guettler ), experience (Andersson ; Bruns et al ), education (Bruns et al ) and traumatic experiences (Morales‐Acevedo and Ongena ). We add to this literature by documenting an important role of loan officers' numerical skills for the quality of lending decisions.…”

Introduction to the Symposium on Contemporary Banking Research: The Use of Fixed Effects to Disentangle Loan Demand From Loan Supply

“…Empirical identification has largely relied on the use of demand‐related fixed effects, which has also been applied in several analyses within this symposium . Morales‐Acevedo and Ongena () apply such a control for loan demand at the industry level in order to assess the impact of bank branch robberies in Colombia on subsequently approved loans and their conditions, conjecturing that such a stressful event experienced by loan officers leads to temporarily emotionally motivated lending decisions. Agarwal, Duttagupta, and Presbitero () use this method to establish how reductions of commodity prices affect lending in developing countries, or more specifically, which bank characteristics lead to a stronger transmission of the global price shock through loan supply.…”

“…In this symposium, Agarwal, Duttagupta, and Presbitero () cluster firms in the same district and industry. Morales‐Acevedo and Ongena () combine firm size, age, number of borrowing relationships, existence of prior arrears, credit quality rating and industry affiliation to form firm clusters.…”