Information and Incentives Inside the Firm: Evidence from Loan Officer Rotation
Top Cited Papers
- 7 May 2010
- journal article
- Published by Wiley in The Journal of Finance
- Vol. 65 (3) , 795-828
- https://doi.org/10.1111/j.1540-6261.2010.01553.x
Abstract
We present evidence that reassigning tasks among agents can alleviate moral hazard in communication. A rotation policy that routinely reassigns loan officers to borrowers of a commercial bank affects the officers' reporting behavior. When an officer anticipates rotation, reports are more accurate and contain more bad news about the borrower's repayment prospects. As a result, the rotation policy makes bank lending decisions more sensitive to officer reports. The threat of rotation improves communication because self‐reporting bad news has a smaller negative effect on an officer's career prospects than bad news exposed by a successor.Keywords
This publication has 37 references indexed in Scilit:
- Corporate Governance Reforms in Continental EuropeJournal of Economic Perspectives, 2007
- Does function follow organizational form? Evidence from the lending practices of large and small banksJournal of Financial Economics, 2005
- Semiparametric Difference-in-Differences EstimatorsThe Review of Economic Studies, 2005
- Mutual Fund Flows and Performance in Rational MarketsJournal of Political Economy, 2004
- Authority and Communication in OrganizationsThe Review of Economic Studies, 2002
- Careers and Survival: Competition and Risk in the Hedge Fund and CTA IndustryThe Journal of Finance, 2001
- Career Concerns of Mutual Fund ManagersThe Quarterly Journal of Economics, 1999
- Formal and Real Authority in OrganizationsJournal of Political Economy, 1997
- Why Are Professional Forecasters Biased? Agency versus Behavioral ExplanationsThe Quarterly Journal of Economics, 1996
- Why Hang on to Losers? Divestitures and TakeoversThe Journal of Finance, 1992